The gold market is ending the trading week on a sour note Friday as prices have declined substantially. Spot gold is down over $15 per ounce as the day session winds down following the release of much stronger-than-expected jobs data. The U.S. added some 528,000 jobs in July, far above the estimates for an addition of 260,000 jobs. The hot jobs data may keep the Fed on track now, and further large rate hikes could be seen in the months ahead.

The notion of an aggressive Fed has boosted the Dollar Index as well as treasury yields. Both rose in the aftermath of the non-farm payrolls data Friday, weighing on gold in the process. It will be some time before the FOMC meets again. Between now and September, investors will monitor the data stream closely. Any more data that exceeds expectations like it did today could fuel further rate hike risk. The Fed could hike by another 75-points in September if it sees fit. Today’s jobs data simply provides the Fed with no reason to consider a pause.

If the Fed is not given reason to consider taking a pause, rate hikes could continue in the same manner they have been implemented already. An aggressive Fed could take rates several points higher from current levels as it attempts to combat rampant inflation. More rate hikes may not bode well for stocks and risk assets, however, and more selling and volatility could be seen in the months ahead.

Despite the possibility of higher interest rates, the gold market could see some sustainable upside if conditions warrant. Should inflation become entrenched, for example, investors may flock to gold to preserve their purchasing power and protect their wealth. Gold could also become a viable alternative to stocks should equity markets really fall off the rails and drop significantly.

The summer doldrums are now in full swing. Gold and other markets could remain relatively sideways over the next few weeks until volumes start to return. Once traders do return, however, the gold market could potentially take off on a more sustainable run higher or lower. The bulls have done a good job, thus far, of absorbing the selling pressure. Now that gold has started to turn higher again, the longevity of the move may depend on investors focusing on the long-term rather than the short-term.

The long-term bullish narrative for gold is unchanged. If investors see value around current price levels, we expect gold to again take off to the upside. A move above the $1900 level, on a closing basis, could set the stage for a run back to all-time highs or beyond. Volatility within the market has been constrained until this past week. Should the volatility expansion continue to widen, the bulls could have a very successful month of August. The bulls first need to produce a close above the $1800 level. Doing so may attract fresh buying interest that could propel prices higher in the weeks ahead.

The gold market is taking a breather today as the bulls may have exhausted their near-term energy in recent days. Spot prices are down in late morning trade, albeit only by less than $1 per ounce. With the market currently sitting around the $1760 area, the bulls are still well within striking distance of the $1800 level.

Buying interest in gold today is being hampered by rising risk appetite as well as rising treasury yields. House Speaker Nancy Pelosi did in fact visit Taiwan yesterday and the visit went off without incident. China has vowed to retaliate, however, and plans on conducting a large-scale military exercise near Taiwan.

Treasury yields have been on the rise this week as investors attempt to figure out the Fed’s plans in the months ahead. This week, it appears that many investors are of the opinion that the Fed will in fact continue to raise rates in the months ahead. That notion has driven yields on the benchmark 10-Year Note to 2.75%.

The FOMC meeting and announcement of last week has seemingly stirred some confusion about the Fed’s intentions going forward. Fed Chairman Jerome Powell did leave the door open for what, if anything, the Fed may do come September. He said the Fed would watch the data stream and base any decisions off of it. While there have been some signs of inflation already peaking, the data stream remains full of highly inflationary data that may keep the Fed tightening for some time to come.

If the Fed does in fact continue to ratchet rates higher, the stock market and other risk assets are likely to see increasing volatility and possibly a major sell-off. After some rough times in recent weeks, the stock market did have a surprisingly strong July, rising by nearly 10%. The road for stocks higher may be met by very willing sellers who are happy to sell at higher levels. With nothing of consequence having really changed, at least as of yet, there may be no reason to trust the recent rally in equities.

After a brief dip below the $1700 level last week, the gold bulls have returned. Prices have been driven higher in just a few days’ time as shorts have been forced to cover. The bulls have a genuine test at the $1800 level. If able to produce a close above this key technical level, the bulls could attract a fresh wave of buyers that could take prices even higher.

The bears still need to produce a close below the $1700 level to gain further momentum. If able to do so, the bears could take the market rapidly lower. The recent upside in gold could have room to run, however, as the next FOMC meeting is not for nearly two months. With the long-term bullish narrative being unchanged, bargain hunters and patient longs may still look to buy around current levels.

The laser several days have been interesting for the gold market. It started on Wednesday of last week as the Federal Reserve announced its decision to raise rates by another 75-basis points. Despite the large rate hike, the Fed was not seen as being as overwhelmingly hawkish as some had anticipated. Chairman Powell left the door open for what the Fed may do in September. Some believe, however, that Powell was simply looking to begin pivoting away from aggressive rate hikes.

If the Fed does not raise rates aggressively in September, it could send some very mixed signals into markets. For months now, the Fed has stated that it believes that inflation is the biggest economic danger. It also said it will combat inflation using the tolls within its arsenal. However you may interpret previous Federal Reserve commentary, one thing seemed certain: The ed would use interest rates to achieve its desired outcome. In this case, that means reining in inflation from 40-year highs and getting price pressures under control.

The Fed has done so in recent months. It has hiked interest rates aggressively, including two 75-point hikes in a row. As the Fed has done so, however, stocks have come under pressure and rising volatility. That made some begin to question whether the Fed would have the guts to stick it out and stay on its recent course of higher rates. Those concerns increased further in recent weeks. The Fed’s commentary of last week may, however, put some of those concerns to rest.

Stocks did have a wonderful July. They rebounded nicely from previous selling pressure and have now been trending higher on the daily charts. Whether they can maintain the recent gains is another matter entirely. If the Fed keeps hiking, stocks will likely come under considerable pressure once again. If the Fed elects to take a pause or even reverse course and start lowering rates again, stocks could head sharply higher and do so rapidly. Not only stocks, but gold could also achieve an elevated stance from such a scenario and could even rechallenge previous all-time highs in short order.

With two-months to go until the next FOMC meeting, there is plenty of time for gold to move higher in the meantime. The technical picture remains largely unchanged. The bears will look to produce a close below the $1700 level. The bulls will attempt to retake the $1800 area and produce a close above it. Whichever side is violated first, on a closing basis, will likely determine gold’s direction over the next several weeks or even months. With several weeks until the FOMC meets again, the move could extend far and could continue once the Fed has met again.

The recent period of low volatility may also fuel a significant move as volatility expands. The market has now begun a possible extended move higher, and recent lows may quickly become a thing of the past.

The gold market is higher again today, having pushed slightly above the $1750 level. Gloomy economic data is the primary factor in today’s upside, with the Federal Reserve possibly taking a more dovish approach also playing a role.

The U.S. economy unexpectedly showed a contraction for the second-quarter today. Consumer spending was at its slowest pace in some two years and business spending also declined. These could fan the fears of a coming recession or possibly even point to a recession already being in place. A slide in U.S. Treasury yields today also fueled upside for gold and could continue to do so if yields continue to descend.

With today’s GDP data seemingly confirming recessionary fears, the Fed may find itself having to slow the pace of further rate hikes or raise rates in smaller increments. Yesterday, the Fed raised rates by another 75-basis points. The gold market seemed to be pleased the Fed did not hike by 100-points, and a relief rally ensued once the announcement was made.

Fed Chairman Powell left the door open for what the central bank may do come September. He said that another large rate hike is a possibility, but the Fed would watch the data until then and allow it to dictate Fed action. The commentary from the Fed Chief was noticeably less hawkish than previous commentary and could point the way towards a Fed pause or even reversal.

The next several weeks may see little price action in gold as the summer doldrums are in full gear. The market may begin to make a meaningful move come the end of August, however, in just a few short weeks. Until that time, the markets may pay close attention to the data stream as well as any fresh developments out of Ukraine. Should more weaker-than-expected data be released, the chances of another large Fed hike may dwindle substantially. If the data steam shows strength, however, the Fed could be forced to consider an even larger 100-point rate hike.

After providing a degree of relief yesterday, the Fed may now consider its approach. Months of hawkish rhetoric have been followed up by several rate hikes this year. The Fed has, thus far, preserved whatever credibility it has. The Fed may now, however, find continuing aggressive rate hikes even more challenging and it could see fit to reverse course.

Until more clarity is seen on policy and what the Fed may do, the gold market may remain mostly sideways. The bulls have done a good job so far of absorbing much of the selling pressure. Whether they can continue to do so remains to be seen, but will likely become known in the weeks ahead.

In the meantime, the $1700 and $1800 areas remain key technical levels within the gold market. Whichever side is breached on a closing basis could point to more movement in that direction. The recent volatility contraction could point to a large move ahead.

Ahead of this week’s FOMC meeting and the likely hike in interest rates that will follow it, the IMF is now warning about the possibility of a global recession. According to the International Monetary Fund, global growth is now expected to decline .4% to a rate of 3.2% in 2021. The decline in growth was the result of several factors. Covid-19 was a major influence on the economic slowdown as well as the war in Ukraine.

The IMF appears to be ringing the alarm bell a bit late. Many have been concerned over a Fed-induced recession for months now. As it looks to combat rampant inflation, the Fed has been raising interest rates aggressively and may continue to do so in the months ahead. The central bank is expected to raise rates by 75-basis points this week while a 100-basis point hike is also a possibility. Should the Fed elect to raise rates by 100 bps this week, it could send a strong message to markets that the Fed means business and intends on staying on course.

Should the Fed stick with another 75-point rate hike, it is still a solid raise and will also show the Fed’s commitment to getting price pressures under control. The Fed may need to preserve its credibility as much as possible. Some are already suggesting the Fed will end up taking a pause after another rate hike or two. The central bank could then decide to reverse course, lowering rates to bolster the slowing economy.

The fact that the IMF is now sounding alarmed may add more pressure to the Fed in the months ahead. The Fed has stated it believes inflation to be the number one enemy of the economy. The Fed seems willing to tolerate a recession right now in order to get inflation under control. The Fed must watch its step carefully, however, as one misstep could send the economy into recession as inflationary pressures remain robust.

Although the IMF still expects positive growth in the years ahead, that growth may depend on how well economies are able to tolerate higher rates and tighter policies. Risks to the economy, cited by the IMF in just April, are now materializing. These include Covid-19 issues, food shortages and more.

The next several months are likely to be bumpy for sure. As the bumps increase, market volatility may do the same. As volatility expands, the desire for physical gold could increase. Although the bears are now in firm control of the daily chart, the bulls have numerous issues that could potentially cause a major reversal.

For the time being, the market still needs to stage a breakout or breakdown from recent levels. The bears are targeting a close below the $1700 level. The bulls need to see a close above $1800 and then the $1900 levels before getting excited. As volatility has shrunk in recent weeks, the market may be getting ready for a major move higher or lower.