Gold prices briefly fell following the release of US inflation (CPI) data. The initial market reaction was driven by concerns that high inflation could force the Federal Reserve to maintain a tighter stance on interest rates. This condition boosted the US dollar and depressed gold prices in the short term.

However, after the market more thoroughly digested the CPI data, gold rebounded. Investors assessed that inflation was not as high as feared or was showing signs of slowing, thus limiting the likelihood of further policy tightening. The weakening dollar and falling US bond yields then boosted interest in buying gold as a hedge.

This movement shows that gold remains sensitive to inflation data and interest rate expectations. As long as economic uncertainty and inflationary pressures persist, gold has the potential to maintain its appeal despite ongoing short-term volatility.

First, when the CPI is first released, the market often reacts quickly and emotionally. If the CPI figure appears high, gold can immediately fall because the dollar and US yields have strengthened. Many short-term traders rush to sell gold based on the initial figure without waiting for the details of the data.

Second, after the market digests the data more thoroughly, gold could rebound. For example, the CPI is high but not hotter than expected, or the core components start to slow. This makes the market believe the Fed doesn't need to raise interest rates aggressively, causing the dollar to weaken and gold to be bought again as a hedge.

Third, uncertainty and geopolitical factors also come into play. After initial volatility subsides, large investors often return to gold for protection, especially if inflation remains high. So it's natural for gold to fall briefly and then rebound strongly after the CPI release.

In short, the first reaction = rapid speculation.
The second reaction = more rational decisions. (Cay)

Source: Newsmaker.id