The gold market is now trading solidly below the key $2,000 level. After being higher by a few dollars per ounce earlier in the session Monday, gold has now dipped and is well into negative territory. Spot gold prices are now down over $6 per ounce at $1977 and change and are vulnerable to a larger scale sell-off if things do not change quickly. A weaker U.S. Dollar and a decline in treasury yields were driving gains earlier in the session. Despite these bullish outside market postures, however, investors may remain largely focused on the Fed and its plans for more rate hikes.

Stock indices have also been hit recently as worries increase over the Fed keeping rates higher for longer. Even as recession concerns mount in recent months, the Fed thus far appears intent on getting inflation under control regardless of the potential consequences. The Fed is likely to raise rates again at its next FOMC meeting but could then possibly signal a pause in rate hikes. Of course, the Fed cloud also signals that it intends to keep going with rate hikes and that rates are going to remain elevated for longer than anticipated. Should the Fed desire to convey this message, it could potentially move markets significantly. Not only would stocks and gold potentially see large moves, but investors could also take a “run for the hills” approach and look to exit all markets simultaneously.

The Fed and its plans have been and will continue to be a major catalyst for the gold market. The market is also paying close attention to the global geopolitical scene, however, and could also see movement based on any changes within it. Tensions between Russia and the West have not been this high since the days of the Cold War, and worries over a Chinese invasion of Taiwan have been on the rise in recent months. Such an invasion would almost certainly cause the U.S. to become directly involved, and it could even be the beginning of the Third World War.

Looking at the long-term rather than just the short, the gold bulls likely recognize the risks in the global marketplace currently and are buying gold based on those risks. Even with gold’s recent downturn, the market remains within a strong trend higher on the daily chart. The six-week-old uptrend will need to be updated at some point, and the bulls will target the April highs around the $2.063 level before taking on previous all-time highs just above that. The bears are targeting the April low of around $1.965 and will not have much going without a breakdown below this level on a closing basis. The market may now need to spend some time moving sideways, however, as some back-and-fill trade takes place. If the bulls retake the $2,000 level, the move higher could happen quickly and decisively.

The gold market is down sharply in early action Monday. Spot prices are down about $23 per ounce in the early going as some investors book profits following gold’s recent run higher. The chart consolidation being seen this morning is not only completely normal but may also be necessary before the metal can sustain another leg higher. The market has lost the $2,000 level this far, however, it could prove to make things more challenging for the bulls.

Key outside markets today are seeing the Dollar Index firmer. Crude oil prices are steady at just under $81 per barrel and the 10-year Treasury is yielding 3.383%. The only market possibly having an impact on gold today is the dollar. The currency may see renewed pressure in the coming days and weeks, however, if talk about China and other nations moving away from it continues.

Although many investors likely took Friday off for the Easter Holiday Weekend, the markets did get the latest release on non-farm payroll data. It showed a rise of 236,000 jobs versus the February gain of 311,000 jobs. The gain on Friday still falls into the camp of the policy hawks, however, and could give the Fed more reason to consider hiking rates even further.

The market may be fairly quiet until the major data point of the week on Wednesday. That day will bring the release of the latest Consumer Price Index (CPI). for March. It is expected to show a rise of 5.1% versus a rise of 6.0% for February. A big miss in this report Wednesday could be market moving. If inflation is hotter than expected, it may reinforce the notion that the Fed has more work to do on rates and that rates will be moving higher yet. If the data shows slower-than-expected inflation, it may boost hopes for the Fed being done or even reversing course on interest rates sooner rather than later.

As worries over a recession increase, inflation and other data become even more important. The data stream will be closely scrutinized by the investing public in the months to come. Better-than-expected data may no longer be viewed as being hawkish, and markets may celebrate good news as being actually “good news.” Major misses in the data may pose a greater risk of recession, however, and could give investors reason to flee stocks and risk assets. Of course, there are also geopolitical risks being seen around the world now also.