The gold market has seen some significant ups and downs this past year. From riding high on easy monetary policy one minute to being drained on large rate hikes the next, the yellow metal has been all over the place. That trend has dissipated in recent months, however, as the market has maintained a trading range from $1800 to $1900. The bulls and the bears appear ready and waiting to jump on the next significant catalyst which could arrive at any time now. Such a catalyst could take time to develop, however, and the longer it takes the more time the metal may stay range-bound.

 

A big positive for the gold bulls may be last week’s 75-basis point rate hike. The hike was the largest by the Fed in about 30 years and may demonstrate that the central bank is quite serious about fulfilling its mandate to control price pressures. As a positive for the gold bulls, the market held up quite well in the aftermath of the rate hike and is still trading in its recent range. The metal likely held its ground as the Fed may have thrown up a massive red flag when it raised rates by 75-basis points, the largest increase in almost 30 years. The Fed is determined to fight inflation, and in doing so, may become increasingly likely to push the economy into a recession.

 

Although the Fed has signaled that rates could hit 3.50% by the end of the year, investor fear could keep gold in the mix even as yields continue to rise. Fears over the Fed sending the economy into recession may have changed the relationship between gold and interest rates. Gold may still rise, and rise substantially, even as the Fed looks to hike rates to combat inflation.

 

Fears over a Fed misstep may be overdone at this point, and the central bank could still possibly achieve a soft landing despite a narrowing window. The labor market remains healthy, and if Americans are able to hold onto their jobs, a recession can still be avoided.

 

Despite the Fed’s recent action, it remains well behind the inflation curve. Some analysts have argued that the Fed would need to hike rates to the 20% level (As was done in the Volcker days) to get inflation to a tolerable level. This seems extremely unlikely at this point in time, however, and investors may just have to remain nimble and nervous when it comes to what the Fed may be able to accomplish.

 

The market remains stuck in neutral as it sits near the $1850 level. The $1800 and $1900 levels remain key areas of support and resistance. Whichever level is breached first, on a closing basis, could determine gold’s trend for the next several months. The market could, however, spend even more time in its recent range as investors await more moves from the Fed and the effects of those moves to work their way through the economy.

 

The gold market is a bit softer today as the bears look to follow through on recent selling. A stronger dollar and rising yields are the primary culprits today behind gold’s weakness and may continue to limit the metal’s upside in the weeks ahead. Another hot reading on inflation today has done little if anything to help the bulls.

 

The Producer Price Index was released today and showed a rise of 10.8% year-over-year. The index showed a .5% rise from April figures and the readings were basically in line with market expectations. Markets showed little reaction to the data, therefore, as inflation remains a hot topic. Despite the muted reaction to the PPI data, inflation is in fact running very hot across the globe and may be a bullish factor for gold and metals over the long-term.

 

Although the PPI data is important, the main  area of focus for this week is the FOMC decision due for release tomorrow afternoon. The Fed began their policy meeting Tuesday morning and will wrap it up with a decision on policy Wednesday afternoon. It is widely expected that the Fed will raise the Fed Funds Rate by 50-basis points tomorrow. The Fed is also likely to do so at its next meeting as well, and possibly even beyond that. Some analysts believe the Fed could even hike rates by 75-points this week. Fed Chairman Jerome Powell is set to hold a press conference after the decision and investors are likely to pay close attention. Powell could provide clues about the Fed’s outlook and its plans going forward.

 

Outside markets are not doing much to help gold today. Crude oil is higher, trading at over $122 per barrel. The Dollar Index is also stronger on the day, trading not far from the recent 20-year highs touched earlier. Yields for the benchmark Ten-Year Note are at 3.3%, not far off from recent 14-year highs reached at 3.371%.

 

The bears remain in control of gold on the daily chart. The bears will look to produce a close below technical support at $1800. A close below this level could spell trouble for the market and a fresh wave of sellers could potentially enter if the market closes below this level. The bulls will look to first take out the week’s highs around $1882 and then produce a close above the $1900 level.

 

The Fed meeting and policy decision Wednesday has the potential to move markets, and move them dramatically. Should the Fed take an even more hawkish tone, it could send stocks sharply lower while also weighing on gold. Should the Fed sound more dovish, however, both stocks and gold could potentially rally. At risk also is upside for the Dollar Index which has been moving higher on the notion of higher rates. A weaker dollar could put the gold bulls back in the driver’s seat and could send the market back towards resistance.

The gold market is still not far from the $1850 level and could remain very subdued until next week. The FOMC meeting will take place next week and the announcement on policy is expected at its conclusion Wednesday afternoon. The three-week holding pattern that gold has been stuck in could continue until that day. Prices have been stuck in neutral as investors may

be awaiting more clarity from the Federal Reserve on its plans moving forward.

 

The CME Fedwatch tool currently shows a greater than 90% likelihood the Fed will again raise rates by 50-basis points next week. The Fed has suggested that it will likely raise rates by 50-points at its next two consecutive meetings while markets have priced in the Fed doing so at the next three consecutive meetings. What’s at stake with next week’s meeting? A lot. For starters, the Fed will need to keep its credibility and thus hike accordingly as it has suggested it will do. Although there may be some significant knee-jerk reaction to the Fed announcement, it is also very important for investors to remain focused on the bigger picture.

 

Friday’s Consumer Price Index data may shed some light on the bigger picture. Inflation is expected to show a year-over-year rise for May of 8.2%. This would indicate a slight drop from April’s reading of 8.3% and could add more credibility to the notion that inflation may have already peaked. Should the figure come out higher than expected, however, the Fed could see it come under serious pressure to hike even more aggressively and drain liquidity from the system. In such a scenario, markets would be unlikely to take the news well and could find themselves being sold heavily. In that case, gold could stand to benefit as investors may look for perceived safe havens in which to put capital to work in. Even if the CPI data does suggest inflation has peaked, no one knows how long it may take for prices to back down. Inflation could be problematic for some time. Any missteps by the Fed during this period could be catastrophic and could lead to an extended period of stagflation or even a recession.

 

The Fed has a lot to deal with currently and is on very fragile footing. Having backed itself into a corner, the central bank may look to leave its options as open as possible while it tries to navigate the rough economic waters. Adding to the Fed’s problems, the war in Ukraine is showing no signs of a slowdown as of yet and the stock markets remain in downtrends despite some recent rallying.

 

The $1800 and $1900 levels remain key for the bulls and the bears. Whichever way prices eventually do breakout, they are likely to continue moving in that direction for the months ahead. The dip has been purchased so far, however, the bulls just need a little more strength to establish a fresh trend higher.

The gold market is higher Tuesday as the bulls step in and buy the dip. The day’s gains are keeping the recent uptrend alive and have pushed spot prices back to resistance at the $1850 level. Stock market weakness and crude oil strength may also be playing a role in gold’s upside today as bargain hunters pounce after recent price weakness. Not much has changed in the gold market in recent weeks, and the period of price consolidation could be nearing an end.

 

Inflation remains a major market influence and one that will likely continue to affect gold for months or years to come. Treasury Secretary Janet Yellen will be grilled by lawmakers today and Wednesday concerning the Biden Administration’s budget plans as well as how it plans to deal with rampant inflation. Yellen will likely discuss more of the same, suggesting that rate hikes may take care of inflation without slowing the economy down too much. Should Ms. Yellen express different concerns or a varying point of view from other officials, it could upset investors and produce a new wave of uncertainty within markets that could heighten volatility and increase selling in risk assets.

 

The Federal Reserve has already said it would use all of the tools at its disposal to combat inflation. Whether the central bank actually follows through with this plan is another source of concern for markets. The Fed is not known for always doing what it says it intends to do, and the pressure on the central bank is likely to mount considerably as stocks and risk assets sink further on higher interest rates. The true test of the Fed’s mettle likely won’t be seen for a few months, until it has had the chance to raise rates significantly higher from current levels. The risk of the Fed pausing or reversing course must be considered, as it could lead to an extended period of stagflation.

 

More inflation data is due for release later in the week. The European Central Bank is meeting Thursday and will likely lay out its plans for tighter policy in the months ahead. The U.S. Consumer Price Index is set for release on Friday. CPI is expected to show a rise of 8.2%, following April’s rise of 8.3%. A stronger-than-expected reading could send markets into a tailspin while a weaker-than-expected figure could provide some needed relief.

 

The gold market remains in no man’s land currently although the bulls are now showing some signs of life again. Spot gold is currently at $1850 on the nose. A breakout above this level in the days ahead could signal a rally, and prices could rapidly be lifted to attempt a breakout above the $1900 level. A failure near current levels, however, could have the opposite effect and could see prices decline significantly, possibly testing the $1800 level in short order. A breakout above $1900 or a breakdown below $1800 could dictate gold’s movement for the months ahead.

The gold market is being sold off Friday after the non-farm payrolls data beat expectations. The non-farm payrolls data for May showed a rise of 390,000 jobs with estimates looking for a rise of 328,000. The unemployment rate did not dip, however, and stood at 3.6%. Average hourly earnings also rose by 5.24% annually. The gold market did not show much of a knee-jerk reaction to the figures, but has since grown increasingly weaker throughout the session. The better-than-expected data is a win for the hawkish policy camp as it may allow the Fed to continue raising rates without any worries.

 

The jobs data did not do much for the stock markets, either. Stocks are solidly lower at mid-day and could be headed for a rough close to cap off the trading week. The selling being seen in equity markets today is nothing new. The market may simply be gearing up to resume its downtrend and weakness after a solid showing last week. Such is often the case in a bear market and the ride is likely to continue.

 

Although gold held the $1860 level for much of the session, it eventually succumbed to bearish pressure and slid even lower. Spot prices are now below the $1850 level in what could prove to be a key technical pivot. The $1850 area has been a battleground for weeks now, and prices sinking back below this area may encourage more sellers to sell or get short. A deteriorating technical picture for gold may not do the market any favors as the metal is seemingly already lacking any fresh bullish inputs. In the absence of new bullish influences, the market may remain vulnerable to additional selling pressure that could see it test the $1800 level in a short period of time. If the market does produce a close below that level, look out below. If the bulls are able to hold prices above it, however, it could be viewed as being constructive and a great long-term buying opportunity.

 

The bears are maintaining control of gold on the daily chart. That control had com3 under fire recently, however, as the bulls rallied prices back above the $1850 level. That upside negated a 2.5-month downtrend on the daily chart. Whether the trend lower continues or not, the bulls do have their work cut out for them. The bulls need to produce a close above the $1900 level to gain momentum. Additional buyers are unlikely to enter the market unless gold breaks out above this level and the lack of fresh buyers may severely limit any possible rallies in the meantime.

 

Rising yields, dollar strength and an aggressive Fed may all act as barriers to higher gold in the months ahead. Despite these factors, however, the bulls do have reasons to buy gold and may continue to do so. Given U.S. debt levels, the geopolitical scene and the potential for a recession, gold may be unlikely to decline much further.