In a follow up to yesterday’s upside, the gold market is moving solidly higher again today as hot inflation and bullish outside market activity fuel buying. Spot prices are up nearly $15 per ounce at lunchtime on Wednesday and are now well within striking distance of resistance at the $2000 level. The latest reading of the Producer Price Index showed a rise of 11.2% year-over-year and up 1.4% from the February reading. The 11.2% year-over-year reading is the highest ever recorded and represents the highest level of price inflation in 40 years.

Outside market action is bullish for gold today. The dollar is weaker after hitting a two-year high overnight. Benchmark 10-Year Treasury yields have backed down a bit as well in a welcome relief for markets. Crude oil prices are higher again today and are currently trading around $103 per barrel. The inflation narrative is likely to continue to be the primary driver of gold prices in the months ahead. Record setting inflation may keep buyers in gold motivated to keep buying and any dips may be snatched up by open arms rapidly. The ongoing war in Ukraine may also keep this buying going, as it not only increases inflationary price pressures but may also fuel a fear of the unknown and overall risk aversion.

The U.S. Federal Reserve is likely to continue raising interest rates in the months ahead. After hiking rates by 25-basis points in recent weeks, the Fed could even elect to raise the key interest rate by 50-basis points at its upcoming meetings. A larger rate hike could help the central bank get a handle on inflation but is unlikely to deter any serious interest in gold.

Now within striking distance, the gold bulls will look to produce a close above resistance at the $2000 level. If the bulls are able to produce a close above this level, the metal could find itself off to the races and may approach previous all-time highs in rapid fashion. The bears are looking for a decline to produce a close below $1900 and then $1850. The bears will not really have much going unless prices do close below $1850 which at this point is seeming increasingly unlikely.

The market is still in no man’s land but is rapidly approaching an upside breakout. Should the market see an upside breakout it could pave the way for a quick and sharp run higher. If stock markets weaken in the weeks ahead or if other market dynamics change, the yellow metal could see a fast run higher that could take it to $3000 or beyond.

Calls for peak inflation may be proven to be premature. Today’s hot PPI reading only serves to reinforce the negativity surrounding price pressures and the seriousness of the problem. It will almost certainly take some serious action from central banks to get a grip on the issue and inflation could be here to stay for much longer than previously anticipated.

The gold market is moving up a tad in late morning trade Wednesday as investors await the minutes from the latest FOMC meeting. At the core of investors, angst is whether the central bank will actually elect to raise rates by more than 25-basis points at the next meeting and other meetings beyond that. The Fed has seemingly made clear it intends to fight inflation and will use all of the tools at its disposal to do so. The Fed has now said it sees a total of seven rate hikes for 2022, but with some 50-basis point hikes, rates could end the year significantly higher than originally expected.

Does the Fed have the guts. That may be the question now being pondered by many market participants as inflation continues to take a toll. The Fed is known for doing a lot of talk and not following up that talk with a lot of action. Whether this time around proves to be similar remains to be seen. The Fed has expressed increasing concern over price pressures, however, and has already adjusted the number of rate increases it sees in the year ahead. The central bank appears ready, willing and able to implement policies that could slow economic growth to a standstill. Aggressive monetary policy may be the only method the Fed has to combat inflation which now stands at the highest level in 40 years. After having seemingly backed itself into a corner, the Fed now must choose the lesser of two evils: Allow inflation to rage on while keeping rates moderate or act aggressively towards inflation and hike rates as much as necessary to get the job done.

In addition to the ongoing war against inflation, the markets are also having to consider the ongoing war in Ukraine. While no major news of substance has been seen in weeks now, the battle rages on. New sanctions against Russia may provide added pressure on the nation to rethink its plans, although the country has thus far not shown any meaningful signs of giving up. The threat of a potential ban on Russian oil and energy exports may keep energy prices elevated until the war is resolved or sanctions on energy products are actually implemented. Higher crude oil and natural gas prices could not come at a worse time, either, as they may also push the prices of already-elevated commodities even higher.

The gold bulls remain in control of the daily chart. Price action has been minimized in recent weeks and the market may simply be in back and fill mode before the next major move up or down. The bulls will look to take prices back above resistance at the $2000 level on a closing basis. The bears will look for a decline below $1900 and then the $1850 level on a closing basis. The market could spend several weeks or more in no man’s land as prices continue to consolidate. The longer gold goes sideways, however, the more major the next move up or down could potentially be. Given the current geopolitical and economic backdrop, the smart money may still bet on higher prices to come in the months ahead. This could keep any dips in the gold market being aggressively bought for the foreseeable future and may keep any dips in price from falling too far.

The gold bulls are still in firm control of the market as prices rose Monday to kick off the new trading week. The yellow metal rose today on stronger crude oil prices as well as ongoing worries over inflation. The ongoing war in Ukraine between Russia and Ukraine continues on, and Russia’s crimes against civilians are becoming increasingly apparent.

Ongoing Russian aggression could force the U.S. and its allies to implement even more sanctions against Russia. These could include bans on energy exports from Russia, which has the potential to send crude oil and natural gas prices sharply higher. Despite the possibility of additional sanctions against Russia, the markets have seemingly gotten used to the war and there has been little to no fresh developments in recent weeks. This has given investors time to focus their attention on other major issues such as inflation and its potential effects on the global economy. Price inflation has shown in the past to be bullish for precious metals, and this time around may prove to be no different.

Crude oil traded at over $101 per barrel today in price action that was significantly higher. The stronger crude oil market comes at an already bad time for investors and markets. Stronger crude oil prices may not only erode the purchasing power of the average household, but  may also lift commodities higher across the board. This could make current inflation somewhat self-sustaining while it pinches the wallets of both Americans and those abroad. Recent inversion in the yield curve may be pointing to an incoming  recession already, and continuing price pressures may only fuel further concerns over a major economic slowdown.

Despite the worries over a slowdown and possible recession, stocks have maintained strength in recent weeks. The equity markets are in the midst of near-term uptrends, and despite the threat of rates rising sharply in the months ahead, have maintained their appeal in recent weeks. Of course, the demand for equities could abate and do so quickly if the war takes a turn for the worse or if the Fed elects to take some form of stronger or surprise action to combat inflation. For the time being, however, stocks may remain a place to go for investors looking to put capital to work.

The gold market is still in a good place as well, and could continue to trend higher in the m months ahead. Price action recently has become choppy and irrelevant. The bulls will need to take out last week’s highs around $1967 to attract more momentum buyers. The bears will look for a decline to produce a close below the March lows around $1888. From there they will target the $1850 zone as their next primary goal.

Currently in no man’s land, price action could see more time in between these areas before making a sustainable move up or down. Whichever way the market goes may be sustained for a period of time. If the bulls move the market higher, new all-time highs could be seen shortly thereafter.

The gold market is higher in mid-morning trade Wednesday as crude oil sees some upside. The metals are also seeing some corrective bouncing after being pushed to five-week lows yesterday. The strong rebound in crude oil prices from a low this week of less than $100 per barrel is also lifting gold and other commodities.

The gold market is dealing with three major elements currently as are other markets: The Russian/Ukrainian war, rising global inflation and new rolling lockdowns in China due to Covid. Despite the presence of these three major issues, stocks have continued to climb higher and are now at nine-week highs. Encouraging peace talks between Russia and Ukraine may be a major factor in equity resilience, although it would be far too premature to suggest the war will be ending soon. Of course, the market’s ability to shrug off the conflict may only last for so long and any escalation in hostilities may eventually put a major dent into stocks and risk assets.

Gold has been largely affected by outside market action and that is likely to continue in the months ahead. Crude oil has climbed back above the $100 per barrel mark and is sitting at about $106 per barrel today. OPEC is set to meet tomorrow to discuss production from May forward and the meeting could be market moving. Any major changes in production quotes could set oil prices on a course higher. A large increase in production could also be implemented, possibly dragging oil prices lower. Whatever the cartel decides to do, oil prices could see heightened volatility in the days ahead. That volatility could also spread to other commodity markets and could even affect the gold market.

The dollar has also been a major player in gold’s price action. The dollar is weaker today, however, and could see further selling if recent lows are broken. The dollar had been trending higher for some time but has seemingly run out of gas. Any further dollar weakness may give gold a boost as it makes the metal relatively less expensive for foreign buyers.

Rising yields have also been the topic of much discussion in recent months. The benchmark 10-year Note is currently fetching a yield of 2.38%. Yesterday, the yields of 2 and 10-year treasuries inverted, albeit briefly, in what many believe is a sign of a coming recession. Yield spreads will continue to be closely monitored, and any inversions in the curve may fuel a degree of investor panic as recession fears intensify.

The gold bulls are still in control on the daily chart. That control has come under some significant challenge in recent days, however, and the bulls appear to be hanging on by a thread. Last week’s highs around $1967 remain the next target for the bulls, while the bears will look to produce a close below the $1850 level. Until one of these areas is breached, the market remains in what may be viewed as no man’s land.

The gold market is getting the week started off on the wrong foot as prices are moderately weaker at lunchtime Monday. Spot gold is down over $20 per ounce around $1937 as higher bond yields and sharply weaker oil prices take a toll. Today’s declines may also simply be due to a pullback within an uptrend and some back and fill price action on the chart. Whatever the case may be, the yellow metal is weaker today and could be seeing some effects from an increasingly hawkish policy stance by the Fed. The central bank is now expected to raise rates at its May meeting by 50-basis points rather than 25. Another 50-point hike could follow the first in May, possibly allowing the Fed to get a hold on rampant inflation.

In addition to worries over a hawkish Fed and the ongoing war in Ukraine, markets may also be feeling some concerns over the rolling Chinese lockdowns due to Covid. The major city of Shanghai has now been placed in a rolling lockdown, and some companies have been forced to halt production in the area. The Chinese lockdowns could be a contributor to oil’s weakness today and may weigh on commodities across the board if not ended soon.

The benchmark 10-year Note is now fetching a yield of over 2.45%. Rising yields may become increasingly problematic in the months ahead. Some parts of the yield curve have already inverted, suggesting that a recession could be approaching in the U.S. Worries over slowing economic growth and the potential for a full-blown recession are likely to increase significantly in the months ahead as the Fed battles inflation with higher interest rates. The central bank’s hawkishness could fuel market volatility and some major sell-offs even without a recession. Investors are likely to view tightening monetary policy as a precursor to a major economic slowdown, and as such, may elect to jump ship from equities and risk assets earlier as opposed to later in the cycle. This could keep stocks in a “sell the rallies” type of environment and trending lower as the year progresses.

Gold may play an increasing role in the Russian/Ukrainian war. Since it annexed Crimea in 2014, Russia has tripled its gold holdings. While Western sanctions have frozen a large part of Russia’s reserves, gold is seemingly beyond the reach of sanctions-at least for now-and may be used to keep money flowing in Russia. The U.S. and other nations are looking to close this loophole, however, and the Treasury Department has said that anyone transacting gold held by the Russian Central Bank could face penalties.

The bulls remain in control of the daily chart. The $2000 level remains the next logical target on the upside. The bears will seek a further decline to produce a close below the $1900 level. Price action in between these levels may just be noise. A legitimate breakout to the upside could be seen soon, however, barring any major news events or policy changes.