The gold market is declining on Thursday as the bears seek to build some momentum. Spot gold prices are down over $7 per ounce and now sitting around the $1810 level. The bears will likely look to make a run below the $1800 level in the days ahead, and if able to produce a close below that, could see prices embark on a fresh leg lower.

Although gold has several factors working against it right now, it also has several key bullish factors that may keep it from falling much further. Inflation remains at or near 40-year highs. Despite some recent signs that inflation  may have already peaked, price pressures remain a major source of concern for global markets and could keep the Fed and central banks moving to get them under control. The Fed may not be able to take rates as high as it might like, however, as stocks and risk assets would likely continue to deteriorate as the Fed tightens policy. The Fed could, therefore, elect to take a “pause” later in the year or even to reverse course and start lowering rates once again.

A Fed reversal, while possibly giving stocks a boost, could be the worst-case scenario of all. If the Fed does not get inflation to a more manageable level, it could become entrenched and shift market dynamics going forward. While the gold market may tolerate further rate hikes, to a degree, it could also skyrocket should the Fed decide to lower rates again at some point.

Gold could also benefit from the ongoing war in Ukraine. Showing no signs of slowing down, the war has affected prices all over the globe and could continue to do so as long as it is taking place. Not only that, but any additional Russian aggression in Ukraine or towards other nations could be met with harsh resistance from the west, possibly even leading to the Third World War. The threat of that scenario could keep buyers interested in gold as a safe haven and may keep the yellow metal afloat.

Gold could also possibly benefit from massive sovereign debts and runaway spending. U.S. debt now totals over $30 trillion dollars, and there may simply be no way it can ever be repaid without a massive dollar debasement or other measures. While such measures may not happen tomorrow, next week or next month, they could be approaching quicker than people realize

The gold market has been stuck in neutral territory for some time now. Despite some recent declines, the bears may not be able to get much going to the downside in the days and weeks ahead. Willing buyers appear ready to step in and buy any significant price dips. The ability to buy gold “on sale” may be welcomed by patient, long-term investors and could keep the yellow metal from falling much further. Not only may the metal not see additional declines, but at some point the bargain buying is likely to spur a sustainable rally higher.

The gold market is just below the unchanged line in mid-afternoon trade Tuesday. The market has been trading mostly sideways for the last few days now and appears unwilling, thus far, to stray far from the $1850 level. The bears have had a small edge in recent price action, however, and spot gold is now sitting around the $1820 level.

The yellow metal appears to be waiting on some fresh inputs before making an extended move up or down. There are numerous issues at play that could influence gold one way or the other, including the war in Ukraine and the Federal Reserve. Inflation also remains at the forefront of market attention, although there have possibly been some signs recently that price pressures may have finally reached a peak.

There have been a few major catalysts for weaker gold in recent months, and those catalysts are likely playing a role today in gold’s lack of upside. Rising treasury yields and a stronger dollar may both be bearish for the gold market. Both of these rising markets have the potential to weigh on gold even further in the months ahead. Rising yields increase the opportunity cost of holding bullion, while a stronger dollar makes gold more expensive for foreign buyers. Both of these markets are likely being strongly affected by the Federal Reserve and its plans for hiking rates aggressively throughout the year. If the Fed follows through on this intent, yields could stand quite a bit higher from recent levels while there is no telling just how high the dollar could reach.

The gold bulls have done a good job in keeping the market steady. The gold market could have drifted lower as yields rose and the dollar strengthened, although it has not thus far. This could point to a degree of underlying strength within the market that is simply waiting for the right time to expose itself. A look at the long-term monthly chart of gold, for example, shows the bulls are still in firm control. Prices have pulled back from the highs made in March, yes, but they have not pulled back too far at this point. The declines from the all-time highs seen in March may be nothing more than a standard pullback of sorts for a market that will eventually head higher again. If that is in fact the case, the market could spend significant time in a sideways pattern for taking off once again.

The bears will attempt to produce a close below the $1800 level to build some momentum in the weeks ahead. The bulls need the market to close above the $1900 level to attract further buying interest. It seems as if the market may have reached the point of whichever side closes first wins-and that price action could continue in that direction for the foreseeable future. The longer the metal moves sideways-or not at all-the greater the potential move may be once it gets going again.

The gold market is weaker in mid-morning trade Thursday as commodity markets in general see a significant slump. Commodities are almost certainly being hit and hit hard by recession concerns and worries over declining demand in the months ahead. Gold and other markets appear to have undergone a switch from worrying about inflation to being more concerned about the possibility of a recession. Federal Reserve Chairman Jerome Powell’s recent commentary did little, if anything, to alleviate fears the economy will slip into recession in the months ahead. His commentary was hawkish in nature as he said the Fed will remain focused on fighting inflation and using the tools it has to do so.

Outside markets are mixed today. The dollar is stronger at midday while crude oil is weaker. Yields have slipped this week, however, with the benchmark 10-Year Note now fetching a yield of 3.05%. Commodity markets, including crude oil, could remain under pressure in the weeks ahead if the Fed maintains its hawkish rhetoric and if worries over recession increase. Slower demand could affect gold negatively as well, as it could decline alongside other commodity markets and investors could look to go to cash as they wait out the slowdown.

The question for investors now is how will the Fed hike rates in the months ahead. Following last week’s surprise 75-basis point hike, the Fed is very likely to hike by the same amount at its next meeting. After two large hikes in a row, the question is then whether the Fed will try to keep up that pace or if it will slow things down, going back towards a 50 or even 25-point hike. Time will tell, but one thing seems certain: The Fed is way, way behind the inflation curve and can likely do little, if anything, to get it under control.

As investors await more clarity from the central bank, the battle between inflation and recession fears will continue. Gold could stand to benefit from higher price pressures compared to paper assets, although those benefits could take some time to be seen. Worries over recession, however, may be seen far more rapidly and could weigh on gold prices in the months ahead.

Gold remains in neutral territory currently, as it has been unable to breakout above $1900 or below $1800 for weeks now. The market will eventually break out of one of these levels, and once it does, the trend for the coming months could be determined. With little price movement in recent weeks, however, there has been little incentive for longs to enter the market. The gold price could gain considerable steam, however, once some key upside targets are broken on a closing basis. Despite the numerous bearish risks for the yellow metal right now, patient longs understand its value and could view recent prices as an opportunity to buy gold on sale. This mentality could keep the metal from declining much further.

There has been much discussion in recent weeks about the Fed and its plans for higher interest rates. The Fed has already raised the Fed Funds Rate a few times, including a surprise 75-basis point hike done last week. The central bank appears to want to show the world it means business, and will stop at nothing to get inflation under control. Using all of the tools at its disposal, however, does come with a price. Stocks investors may become even more agitated in the months ahead as rates rise further. The Fed could then find itself facing increasing public and political pressure to keep stock investors and markets appeased. Needless to say, markets and investors like lower rates. As the Fed hikes rates even further, lower equity markets may cause the Fed to think twice.

The Fed is likely to hike rates two or three more times this year. As the end of the year approaches, however, the Fed may already have seen significant downturns in equities and risk assets. This could lead it to not only stop raising interest rates, but even to reverse course and strat lowering them at the beginning of 2023. The major Fed reversal could spur the next major bull rally in gold and metals and could quickly send the yellow metal back to all-time highs and beyond.

Higher rates are not only bad for the economy, but may also boost the dollar. The U.S. currency has been moving higher in recent months and could become increasingly problematic if its rise continues. Not only does a stronger dollar affect the U.S.’s ability to manage its debt, it also affects other debt all over the world that is denominated in dollars. The stronger dollar is a problem for the world and the global economy. One of the simplest ways to let some air out of it is to start lowering rates.

The fight against inflation will almost certainly be far from over when the Fed pivots. Not having the ability to raise rates to double digits as it did during the Volcker era in the 1980s, the Fed may simply decide to give up the fight. As it does, the U.S. could find itself in for an extended period of stagflation. This economic condition is defined as high prices with dwindling employment and demand. The economy could, in other words, find itself stuck in a poor position for months or even years. Such a scenario could also be positive for gold, as it could increase investor demand for alternative asset classes.

The gold market for now remains stuck in neutral. The market has seemingly hugged the $1850 level in recent weeks. The $1800 and $1900 levels are the keys and could signify a breakout or breakdown if a close is produced above or below. Against the current economic and geopolitical backdrop, the smart money may be more inclined to bet long than short. Prices could rise, therefore, in the months ahead.

Following Wednesday’s surprise 75-basis point rate hike from the Fed, the gold market is higher as stocks are getting hammered. Although the 75-point hike was not totally unexpected, markets believed the Fed would raise rates by 50-points. The higher rate hike and expectations for another 75-point hike at the next FOMC meeting have heightened recession fears, and there may now be nothing to prevent a major economic slowdown from coming. Fears of that slowdown are almost certainly the primary factor behind today’s major stock sell-off.

The plunging of the Japanese Yen versus the dollar is also impacting markets. The yen has shed about a third of its value against the greenback over the last 1.5 years. As the Bank of Japan keeps its monetary policy easy while the rest of the world is raising rates, this trend could continue. The weakness of the yen may be another symptom of a sickness within the economy and more trouble to come.

These factors may be limiting the downside in precious metals. The bulls have become frustrated, however, due to the lack of any sustainable rallies in the metals. An eventual rally may become increasingly likely the longer inflation remains strong, however, as history has shown that high inflation favors hard assets over paper. The bulls may be forced to simply bide their time and wait. Recent downside in the gold market may have produced an excellent long-term buying opportunity for patient investors.

Gold prices may also be moving higher today on some weaker than expected economic data. The latest reading of the Philly Fed Survey showed a contraction of -3.3. The figure missed market expectations by a large margin as estimates were looking for a reading of 5.1. The housing market also saw a sharp decline in May. Both housing starts and building permits slid more than expected in May, with a decline of 14.4% for housing starts and a decline of 7% for permits. Weaker than expected market data could give gold some buoyancy, as it may keep some from assuming the Fed will continue its recent hawkish path. Should the Fed decide to pause or reverse course on rate hikes, it could send some very confusing signals to markets, however, and possibly lead to an extended period of stagflation.

From a charting standpoint, the gold market remains stuck in neutral. The market is rapidly approaching resistance at the $1850 level today, and could stage a challenge of this area today or in the days ahead. On the other hand, if the bulls challenge $1850 and the market fails to breach it, a fresh wave of selling could enter the market and finally take prices below key support at the $1800 level. For the time being, the $1800 and $1900 levels are areas of focus for the bulls and the bears. Whichever level is breached first, on a closing basis, could determine the metal’s trend for the months to come.