The gold bears are now pressing their positions, taking prices below the $1700 level in earlier action Thursday. Although the yellow metal has since bounced back above $1700, the bears appear to be in firm control of the market at this point. That could mean that a capitulation type of event may be in store sooner rather than later, and gold may only begin to find more solid footing once it does.

The market is being pounded by several bearish elements. A rising dollar, higher yields and worries over a recession to name a few. Declining crude oil prices are also a factor for gold, which hit an 11-month low today. The release of the Producer Price Index earlier today did not do anything for the gold bulls. In fact, the hotter than expected PPI figure (which showed a rise of 11% year-over-year) has seemingly only served to boost interest rate expectations. Markets are now pricing in a good chance of a full, 100-point rate hike at the next FOMC meeting on July 27th.

Should the Fed elect to raise rates even more aggressively and go for a 100-point hike, it could potentially dampen economic activity further and possibly increase the risk of a recession hitting. Some have argued that the U.S. is already in recession, although that remains unclear. The Fed has suggested that it could raise rates quite a bit further without putting the economy into recession, and time will tell whether the central bank is accurate or not.

The notion of an aggressive Fed has likely been a major factor for dollar strength in recent months. The dollar hit a fresh 20-year high today, as rate expectations and differentials drive buying. The so-called “carry trade” is in full effect right now, whereby investors in other nations dump their currencies to invest in dollars. This trade may continue for some time. As it does, it could take the dollar significantly higher from already-elevated levels. This could mean that dollar strength may continue to weigh on the greenback for some time to come. It does also set the stage, however, for a large scale dollar reversal should the Fed take a more moderate approach or decide to reverse course at some point.

The 2/10 yr yield curve remains inverted, and is the most inverted it has been in over two decades. This inversion may be a strong indicator of a recession coming sometime in the months ahead. Investors will pay close attention to the yield curve and may become increasingly agitated by any further inversion. The yield curve inversion is one possible clue about impending recession. The pullback in broad commodity prices may be another. Whatever the case may be, investors are now on the lookout for any further signs of recession and may adjust their portfolios accordingly. Although this may currently be a bearish factor for gold, it could also reverse in the months ahead and drive investors into gold and perceived safe haven asset classes.

The gold market is slightly lower in early action Tuesday. The yellow metal hit an 8.5-month low overnight and is seemingly stuck as the dollar continues to rise. The market is also being hampered by lower crude oil and a lack of fresh, bullish inputs. There are several major issues currently going on, none of which are helping gold at present, however, The spread of Covid-19, recession fears and more could all be bullish elements for the gold market, yet have thus far not shown any ability to provide a sustainable boost.

In the big data point of the week, markets are anxiously awaiting Wednesday’s release of the latest Consumer Price Index data. The CPI is expected to show a year-over-year rise of 8.5% for June and could be market-moving if it is grossly under or over estimated. The CPI data could influence the Federal Reserve as well, and might speed up or slow down the pace of further interest rate hikes. A CPI figure that is above expectations could fall into the hawkish camp and may keep the Fed moving more aggressively. A large miss on the figure, however, could have the opposite effect and may lend some credibility to the idea that inflation has already peaked. In this case, the Fed could possibly elect to take a more gradual approach with rates.

The markets are also awaiting the next FOMC meeting announcement. The Fed is quite likely to raise rates by another 75-basis points this month as it looks to calm inflation. Markets are now expecting a larger hike. What markets may want to know, however, is what the Fed is thinking about going forward. Will the Fed keep hiking rates more aggressively or could it take a slightly calmer approach? Any clues provided by the central bank about its policy plans in the months ahead may be useful for investors and could send the markets moving up or down.

The Fed’s commentary regarding its policy plans may also have large ramifications for the dollar. The greenback has been ascending in recent months largely due to heightened rate expectations. Should those expectations ease or reverse course, the dollar could become very sellable and may start heading lower once again. Dollar weakness could possibly open the door to a reversal in gold as well, as it makes gold cheaper for foreign buyers.

The $1700 and $1800 levels remain key for gold for the time being. If the bears are able to produce a close below $1700, the bottom could fall out and a fresh leg lower may be seen. If the bulls are able to take out the $1800 level, it could attract fresh buying interest and possibly fuel a larger market reversal. The market remains stuck in neutral right now, however, and may require some fresh bullish or bearish inputs before making a sustainable move higher or lower.

The gold market is higher in early action Thursday as the bulls see a slight reprieve from recent selling pressure. Spot gold is higher by less than $5 per ounce, however, and has several hours to maintain those gains for a positive daily close. Gold hit a fresh 8.5-month low this week while silver also hit a 2-year low. Among the bearish factors affecting the metals markets are a stronger dollar (which hit a 20-year high this week) and declining crude oil prices which have fallen below the $100 per barrel level.

The gold and other markets have quickly digested yesterday’s release of the latest Fed meeting minutes. Markets are now pricing in a very high likelihood of another 75-basis point rate hike this month. How the Fed elects to proceed after the next FOMC meeting is unknown, however. The Fed will almost certainly continue to raise rates as it sees fit, although the size of those rate increases remains the subject of debate. After hiking rates not once but twice by 75-points, the Fed could easily decide to go a little easier and only raise rates by 50 or even 25-points. The Fed did reiterate its plans and intentions recently, and appears ready and willing to keep raising rates until inflation is under control. Unfortunately for the Fed, that could take an interest rate of 20% or even more, and the Fed is extremely unlikely to raise rates to Volcker era levels to combat inflation.

Now that the latest Fed meeting minutes are out, markets will now look forward to Friday’s release of the latest jobs data. The June non-farm payrolls figure is expected to come in at 250,000 jobs added. This would be significantly less than the 390,000 jobs added in May, yet still represented a very solid showing. The jobs data does have the potential to be market moving, however, as it could adjust rate expectations. A much stronger jobs figure could lend credibility to the notion of raising rates aggressively throughout the rest of the year. A weaker than expected figure, however, could alter such expectations and could give the Fed something to think about.

The bulls have been smashed this past week and are clearly on their heels currently. Despite today’s very modest gains, the bears remain in frim control on the daily chart and will look to produce a close below the $1700 level in the days ahead. The bulls need to not only stop the bleeding, but also need to take prices back above the $1800 level to attract more interest. In the meantime, bargain hunters may appear and look to scoop up gold at what may later be viewed as highly discounted prices. Although the long-term narrative for gold remains unchanged, the bulls may have to endure some pain ahead before finding some upside. The market is vulnerable to a sharp and rapid rally, however, as numerous bullish issues remain intact and as shorts get heavier and heavier.

The gold market kicked off the holiday-shortened trading week on the wrong foot Tuesday as spot prices slid significantly. The spot gold market sold off sharply, and slid right through key support at the $1800 level. Prices are sitting in the $1766 area in later afternoon action and could be vulnerable to further selling pressure tomorrow and the days ahead. Now that the $1800 level has been breached by the bears, the next target will be $1750. Given Tuesday’s declines, the $1750 area is only a day or less away and could be breached in short order.

The gold market has some key issues working it against it currently. The declines in gold are being driven by rising treasury yields, dollar strength and an overall sense of “blah” that has hit markets in recent weeks. Although the long-term bullish case for gold may still be very well intact, the short-term case may be lacking. In the absence of any fresh bullish catalyst, the yellow metal may remain vulnerable to downside.

Treasury yields have eased a bit in recent weeks. The 10-Year Note yield is now sub-3% again in what could be another sign of inflation having already peaked. The dollar, however, hit a 20-year high overnight and has thus far not shown much, if any,  signs of slowing down. A stronger dollar makes gold less appealing for foreign investors as it becomes relatively more expensive as the dollar ascends. The lack of foreign buying may keep gold under wraps for the time being and remains a major obstacle to a sustainable rally by the bulls.

Of course, the dollar’s recent ascension likely has a lot to do with rising interest rates and an aggressive Federal Reserve. If the Fed continues to raise rates as it has in recent months, the dollar could see further upside. Should the Fed pause or reverse course, however, the dollar could see a nasty reversal that could sink it significantly from current levels. A major dollar reversal could be just the fuel needed by the bulls to take the market higher on a sustainable path. Barring some dollar downside though, the path of least resistance remains lower.

A massive decline for crude oil did not do the gold market any favors on Tuesday. Oil dropped by over 8% on the session, shedding over $8 per barrel and closing below the key $100 level. Further declines for crude may weigh on gold further and could also lend credibility to the notion that inflation may have already peaked. Lower crude combined with lower yields could paint the unnerving picture of an economy headed into a period of stagflation.

For the time being, worries over inflation and the potential for a recession are likely to dominate the headlines and markets. Against this backdrop, gold may have to endure further selling pressure before finding enough support to mount a rally.