By Barani Krishnan

Investing.com – Gold prices fell for a second straight day but still closed above the key mid-$1,800 level — in spite of the twin weights of rallying U.S. bond yields and the dollar.

Bullion enjoyed a spectacular seven-session run which resulted in an impressive net gain of 4.6% over the course of two weeks. Profit-taking started on Monday. Despite the fact that analysts believe bullish momentum was still present in yellow metal, Tuesday’s downside did not end.

“The last couple of weeks has delivered strong gains for gold which now has its sights set on the summer highs above $1,900,” said Craig Erlam, analyst at online trading platform OANDA.

The last time gold traded was June at $1,900.

This was after it climbed from below $1500 in March to record highs of $2,100 by August 2020.

In Tuesday’s session, U.S. gold futures’ most active contract, , settled down $12.50, or 0.7%, at $1,854.10 an ounce. It peaked earlier in the day at $1,879.35 — its highest since June 15.

Gold’s recent run-up was heightened by a Labor Department report that the U.S. Consumer Price Index, which represents a basket of products ranging from gasoline and health care to groceries and rents, rose 6.2% during the year to October. The CPI saw the fastest increase since November 1990. This acceleration was driven primarily by fuel prices that have been at 7-year highs.

The inflation hedge that Bullion is known for has been around since its inception. But it wasn’t able to live up to that billing earlier this year as intense speculation that the Federal Reserve will be forced into a faster-than-expected rate hike sent Treasury yields and the dollar rallying instead.

The trend has slowed somewhat since Fed Chair Jay Powell, earlier this month, assured that any rate increase that comes after the second half of next year will not be a surprise.

However, with the key indicator of real rate of interest hitting a three-week peak of 1.63% Tuesday, it reached a 16 month high of 95.85. That added to speculation that the Fed may have to dump its “patient-for-now” stance over inflation and raise rates faster than its planned timeline of between July and December 2022.

Higher interest rates are better for yields than the dollar and gold. The Fed must double down on tapering its pandemic-era stimulus and do two rate hikes next year if it has any hope of reining in inflation running at more than 30-year highs, James Bullard, the St. Louis head of the U.S. central bank, told Bloomberg Television on Tuesday.

However, gold didn’t fall below its mid-$1,800 price, which is considered a crucial hold to the company’s ambitions to return it back at $1,900. At the height of Tuesday’s correction, gold lost $25, or 1.4%.