Markets have been on the move in recent weeks, and volatility could see some expansion in the weeks and months ahead. There has been very little, if anything, to stand in the way of higher stocks. Markets remain strong, and fresh all-time highs will likely be seen again before things eventually turn south.

Stocks have done a good job, thus far, of focusing on the positives while essentially sweeping any negatives under the rug. This trend will not go on forever, however, and in fact could be getting very close to a conclusion. Numerous issues could potentially put the brakes on the ongoing rally in equities, and when the selling finally starts it has the potential to accelerate quickly. In fact, a decline in stocks of 20, 30 even 40 percent or more cannot be ruled out.

One potential clue that such an inflection point may be on the horizon is the notion that stocks have finally entered the “FOMO,” or the Fear Of Missing Out phase. Investors that have stood on the sidelines, waiting for the “big correction” that never came, are finally unable to tolerate the market moving any higher without them. These investors are now jumping into stocks, and recent inflows suggest that there is significant cash that could still be put to work in equities.

This could be the beginning of the end…

Stocks could now potentially see a strong “melt up” as all of this remaining investment capital finds its way into the market. Another double-digit percentage run higher could be seen in equities before the bottom finally falls out. Markets have a tendency to inflict as much pain on as many people as possible, and it’s usually once every last investor has gotten long.

Not only has the market seemingly entered what could be the final phase of the current bull market, but numerous outside influences could also play a role in a major reversal in stocks and risk assets. The geopolitical landscape remains a potential powder keg. The recent U.S. tax cuts may not have the anticipated effect on the economy. The U.S. Federal Reserve could get more aggressive with monetary policy. Credit is tightening. The list of potentially bearish issues cannot be disregarded indefinitely, and at some point they could weigh heavily on equities.

Some investors seem to have seen the writing on the all and are paying attention. The potential for a major shift in market dynamics, including a possible reversal or even collapse in equities along with a weaker dollar, has likely played a major role in gold’s recent upside. This trend may not only continue, but could quickly pick up speed if there is a sudden and severe increase in stock market volatility.

Recent price action suggests that stocks could be nearing the end of the current bull market just as gold gets ready to embark on what could be an extensive run higher. The warning signs are there in plain view. It’s up to you whether or not to heed the warning.

As the 2018 trading year gets into full swing, many markets are simply picking up where they left off the prior year. Stocks, in particular, continue to climb and seemingly rise each day with little effort. In fact, the stock bull market is a decade old at this point, and you have to wonder if the ease with which the market keeps ascending should be a cause for concern.

Stock market volatility remains stubbornly low, and investors may very well be feeling overly confident at this point. Although the market may not have yet reached a full-on state of euphoria, it could be getting close. Further gains in stocks may attract anyone left waiting on the sidelines for a significant pullback, as the pain of missing out on the rally becomes  too much to take. Once that point is reached (and it could be sooner rather than later), stocks could become extremely vulnerable to what could potentially be one of the greatest crashes of all time.

Recent strength in gold and silver would seemingly indicate that at least some investors are recognizing these risks, and are looking to take proactive steps in adding portfolio diversification for changing market dynamics that could be seen in the year ahead.

Of particular note is the fact that gold has, thus far, remained on the offensive in spite of rising treasury yields. A Federal Reserve official even suggested recently that the central bank may have to take more aggressive action to slow things down. New York Fed President William Dudley was quoted in an article from Marketwatch.com this past week, saying the Fed may have to “press harder on the brakes” in the next few years, potentially increasing the risk of a hard landing.

Mr. Dudley also discussed the recent tax legislation that was passed in the U.S., and was quoted as saying “While this does not seem to be a great concern to market participants today, the current fiscal path is unsustainable.” He added that projections from the Congressional Budget Office see debt servicing costs more than doubling by 2027.

Mr. Dudley’s comments highlight two major issues that could be a significant driver of higher gold in the years ahead, and the issue of exploding deficits and rising debt is likely to gain considerably more attention in 2018 and the years ahead.

The dollar has been moving lower, and the debt issue is without question a major driver of dollar weakness. The greenback is poised for further downside, and gold may potentially benefit from the weaker currency. Consumers may even begin to feel the pinch from a weaker currency, as purchasing power takes a hit and everyday goods and services become relatively more expensive. This may also boost interest in hard assets like gold, which may potentially offer a meaningful hedge against declining paper money values.

The potential for a stock market collapse or reversal, and rising debt are two of the major themes that could fuel a significant rally in gold and other hard assets. Both of these themes could be characterized as being unsustainable, and could lead to widespread market volatility and risk aversion. 

The gold market is kicking off 2018 with a bang, as the market seeks to move further away from previous resistance. The dollar index continues to slump in early trade, and has pushed the gold market to a multi-month high. Although there are a variety of issues that could affect gold prices in the New Year, a weaker dollar is likely to be a theme that is revisited often.

As the New Year gets under way, investors may start moving some capital around as they look to rebalance. Given the current geopolitical backdrop and significant stock market risk, gold and other perceived safe haven assets could potentially see substantial inflows, and the recent rally in gold could continue.

The dollar index had a very poor showing in 2017, declining by some 10 percent. This was the largest yearly loss since 2003, and the first losing year since 2012. The notion of higher rates and tax reforms has not provided an anticipated boost to the currency, and it may remain on the defensive as worries over the deficit increase and as other key currencies move away from ultra-accommodative monetary policies. The dollar index is on shaky ground from a technical perspective as well, and is in danger of seeing another substantial drop based on chart selling.

Although the dollar could be a major driver of gold in the New Year, investors may also pay very close attention to the stock market.

Whether or not 2018 is the year the stock market rally finally comes to an end remains unclear, although the possibility is definitely worth considering. Stocks have been moving higher for a decade now, to the tune of a couple hundred percent. That rally, however, has been built on a house of cards of ultra-low interest rates and quantitative easing. The Fed has already done away with QE (at least for now) and is now in the process of attempting to normalize monetary policy. The central bank has penciled in three rate hikes this year, and seems to be building a case for higher rates in general.

The Fed has spoken of more aggressive policy before, however, and elected to sit tight. If the central bank does take a stronger approach, however, it could have dramatic effects on the stock market. In fact, rising rates could eventually be the final straw for the stock rally. Higher rates would make other asset classes, such as bonds and notes, more competitive and could fuel a decline in corporate profits as borrowing becomes more expensive. The market could finally see a good, old-fashioned correction-or worse-a major sell-off followed by a lengthy bear market.

These risks may keep the Fed walking on eggshells, and the central bank is likely to stay on a cautious and gradual path towards higher rates.

Picking up where 2017 left off, the New Year is also likely to be full of geopolitical issues that could have sweeping effects on global financial markets. The U.S. and Canada have multiple challenges to grapple with, with the North Korean nuclear threat being at the top of the list. Ongoing geopolitical conflicts may also keep a floor under gold prices, and could underpin a significant rally in the metal should tensions escalate further.

The gold market has a number of tailwinds currently, and recent activity would suggest that prices could be headed significantly higher. In fact, 2018 could be the beginning of a protracted bull market in gold that could see a challenge of previous all-time highs or beyond.

The question of whether the Trump administration would in fact be able to make good on a key campaign promise regarding tax reform has been answered. The President has signed the new tax bill into law, and with it comes a host of changes to the U.S. tax code.

The legislation has faced numerous hurdles, and opinion of the bill is widely split along party lines.  Democrats seem to be of the opinion that the bill really only benefits the top earners, while republicans seem to think the bill will benefit nearly all taxpayers. The slashing of the corporate tax rate down to 21% from 35% could potentially make big waves for the economy, although it remains unclear just how much of a ripple it may produce.

Some companies have already announced bonuses to be paid out to employees following the passage of the tax bill. Other companies have also raised their minimum wages. It will likely take some time before any real trickle-down effects are seen. But that is the hope: that corporations keeping more money will use those tax savings on growth, investment and higher wages-all major economic drivers.

Now that the tax legislation has become law, investors will once again turn their attention elsewhere. The current geopolitical climate, the cryptocurrency craze, higher stocks and the notion of rising rates will all be considered by investors as the year draws to a close. In fact, the last few trading sessions of the year will likely feature slowing volumes, and could see some heightened volatility based on a lack of any significant volume.

The gold market has been moving higher once again, as the bears have not been able to capitalize on any recent weakness. The market has stood its ground quite well in fact, which would seemingly be indicative of underlying strength. The question is: does the market have enough of a tailwind to penetrate recent highs and make a sustainable move higher. Perhaps that question will be in answered in the first quarter of 2018.

Heading into the New Year, the aging stock bull market continues on while the geopolitical scene remains extremely challenging.  There is also, of course, the Fed and whether or not it decides to stick with its plans for another three rate hikes in 2018. Investors will no doubt have plenty of issues to chew on as 2017 comes to an end.

Gold investors seem content biding their time until the next shoe drops. The next major bullish catalyst for gold could come in several different forms, from a stock market collapse to an escalation with North Korea to signs of recession. Whatever the case may be, the market could be close to a substantial breakout. With the potential for a stock market reversal or even collapse, geopolitical tensions that rival those of the Cold War and other economic issues, such a breakout in gold would arguably be on the upside. If such a move does occur, the market could be off to the races, and could not only challenge but possibly exceed previous all-time highs in a short period of time. 

The gold market has remained on the defensive in recent trade, as a combination of factors and a lack of any fresh, bullish catalysts weighs on prices. Higher stock markets, potential tax reforms and overall robust risk appetite have all played a part in gold’s recent lack of upside, and may continue to do so for the time being in the absence of any fresh news.

Investors are looking ahead to the highly anticipated Federal Reserve meeting this week, at which the central bank is widely expected to hike interest rates by another 25 basis points. This would bring the key rate to 1.25-1.50% as the Fed continues to look ahead at normalizing monetary policy. Although a rate hike appears to be completely “baked into the cake,” investors will likely be far more concerned with the Fed’s commentary following the announcement on policy.

The central bank will likely offer some discussion on not only the potential path of rates going forward, but its assessment of economic conditions as well.  Some of the key issues that the central bank may address include the inflation picture and tax stimulus. There has already been some discussion about the Fed becoming more aggressive regarding monetary policy if tax stimulus is in fact passed, and markets will be very interested in any type of guidance it chooses to provide. The ongoing lack of inflation may also be a focal point, although prices have recently shown some signs of picking up.

The gold market has a tendency to come under pressure heading into a rate increase, but then often rebounds significantly once the decision has been made official. This time around may be no different.

Stocks have thus far not demonstrated any significant signs of a collapse or reversal, and appear poised for further upside. The ongoing ascent by equities is likely having a substantial effect on gold, and the yellow metal may not be able to mount any sustainable rallies until stocks appear to have topped.

Also potentially having a negative impact on gold right now is the hype surrounding Bitcoin. Various exchanges have now launched futures contracts on the cryptocurrency, and prices could potentially go higher-much higher-before possibly crashing back down to earth. The current state of euphoria regarding that market has is yet another clue about a possible bubble, and that bubble may end badly for a lot of uninformed investors.

On the plus side for the metal, the geopolitical landscape remains complicated, to say the least. The recent decision by the Trump administration to move the U.S. embassy to Jerusalem has enraged many in the Middle East, and protests are ongoing.

And of course, North Korea remains a very critical issue that must be dealt with.

Against this backdrop, gold is not likely to fall too far in price. In fact, recent declines in the metal could potentially represent an excellent long-term buying opportunity for the patient investor. The run higher in stocks will eventually fizzle, and Bitcoin may prove to be nothing more than the next big bubble. Once some of these market dynamics begin to change, the yellow metal will have its chance to shine once again, and that may come sooner rather than later.