Jakarta, CNBC Indonesia - World gold prices fell slightly in the spot market trading this morning. The release of inflation data in the United States (US) made the price of gold correct.

On Wednesday (14/7/2021) at 07:29 WIB, the world gold price was at US$1,806.33/troy ounce. Slightly down 0.08% from the previous day.

It seems investors are more in favor of the US dollar today, after the release of inflation data in Uncle Sam's country. In June 2021, US inflation was recorded at 5.4% compared to the same period last year (year-on-year/YoY). This is the fastest pace since August 2008.

When inflation gets higher like this, the US central bank (The Federal Reserve / The Fed) is likely to accelerate monetary policy tightening or tapering off. This is a positive sentiment for the US dollar.

When the Fed reduces the 'dose' of buying securities (quantitative easing), the supply of US dollars will decrease. Like goods, when the supply decreases, the price will increase.

Then if the benchmark interest rate rises, the rewards for investing in US dollar-based assets will also increase. This will increase the demand for the US dollar. When supply decreases and demand increases, prices will automatically soar.

Good news for the US dollar is bad news for gold. Because gold is an asset that is priced in US dollars.

When the US dollar strengthens, gold becomes more expensive for investors holding other currencies. As a result, the demand for gold fell so that the price was corrected.

However, it seems that the market reaction to the release of inflation data is only temporary. Because 2020, the benchmark is the period of concern due to the Covid-19. At that time, the US even had time to implement a regional quarantine alias lockdown.

Now his condition is much better. There is already an anti-coronavirus vaccine and the US government has opened more "taps" of citizens' activities.

Therefore, will be a transition period. Demand that initially fell because the US people #stayhome, is now blooming again due to the reopening. Prices of goods and services will of course adjust, there is an increase.

Conditions like this are only momentary, one-hit, one-off. After the adjustment process is complete, once the business world is able to increase capacity to meet increasing demand, the inflation rate will return to normal.

"June inflation figures look scary. But again, we judge that this price increase is only temporary. Inflation should be calm again by the end of this year," said Robert Frick, Corporate Economist at the Virginia-based Navy Federal Credit Union, as quoted by Reuters.

Citing ICDX research, the support level for gold in the near term is at US$1,761-1,737/troy ounce. Meanwhile, the resistance level will be in the range of US$1,898-1,908/troy ounce.