By Barani Krishnan

- Gold posted its first weekly loss in three, but bullion’s defenders held defiantly at around the mid-$1,800 level as Friday’s trade dwindled to a close — despite a break below the key psychological level earlier in the day.

Gold has settled higher only one day this week, with the other four days in the red being a sign that the rally that began in the penultimate week of October had reached the exhaustion point.

Yet, with the long crowd fighting to keep the spot price of bullion, as well as the front-month of New York-traded Comex futures, near the $1,850 level, there seemed chances the yellow metal could rebound next week.

“Gold is stuck in a broadening formation and that should remain the case given next week’s shortened trading week,” said Ed Moya, analyst at online trading platform OANDA.

“Inflation and Fed speak are the primary catalyst for gold and right now traders will need to see what happens over the next couple of weeks before having strong conviction on assessing what the Fed will do regarding interest rates,” added Moya.

U.S. gold futures’ most active contract, December, settled Friday’s trade down $9.80, or 0.5%, at $1,851.60 an ounce. It earlier hit a session low of $1,843.60 and was down almost 1% on the week.

Despite swings below $1,850 this week, December gold has also made a five-week high of almost $1,880, shoring up the confidence of market bulls that the yellow metal could still get to $1,900 in the coming days and weeks on the back of the U.S. inflation theme.

​​Bullion has always been touted as an inflation hedge. But it wasn’t able to live up to that billing earlier this year as intense speculation that the Federal Reserve will be forced in a faster-than-expected rate hike had sent Treasury yields and the dollar rallying instead, at bullion’s expense.

That trend abated somewhat after Fed Chair Jay Powell assured earlier this month that the central bank will be patient with any rate hike that will only come after in the later half of next year.

The Labor Department then reported last week 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 through October. It was the fastest growth of the so-called CPI since November 1990, an acceleration driven mostly by pump prices of fuel running at seven-year highs.

Since then, the U.S. 10-year Treasury note, a key indicator of real interest rates, has hit three-week highs above 1.6% and the Dollar Index has reached a 16-month peak above 96. Ordinarily, that combination would have been fatal to gold. But the yellow metal has largely survived those threats this time.