The gold market is higher on Wednesday as spot prices have climbed a solid $12 per ounce to now sit at $1665. The yellow metal hit a two-week high today as it benefited from a decline in treasury yields and the dollar. Also lending the metal a hand was stronger crude oil prices.

There are some key chart developments that could be pointing to something of significance: a top in the Dollar Index. At the same time, U.S. equity markets are showing some signs of a bottom having been reached. This could potentially mean that inflation has or is in the process of peaking. If that is the case, the Fed may not need to keep its foot on the gas with its aggressive rate hikes. The central bank could cross the finish line a lot faster than expected on its hiking campaign, and if so, markets may return to a degree of normalcy.

A dollar top and stock bottom could also suggest that the markets and global economy may be able to avoid a major recession that has been feared for several weeks now. Precious metals traders appear to be taking notice of these recent chart developments, possibly buying as they believe that the dollar and yields have already peaked and metals demand may improve if no recession is seen.

While it may be too early to tell if that is in fact the case, the yellow metal still has some significant hurdles to higher prices. The Fed will almost certainty hike rates again this month and next month, ending the year as it said it would. Not wanting to lose any credibility it has left, the central bank is unlikely to reverse course suddenly even if inflation has topped out. A pause or reversal by the Fed may be far more likely early next year. That does not mean gold cannot rise in the meantime,  but it is something to keep in mind.

The yellow metal remains stuck in no man’s land. The $1700 level is a key for the bulls in the short-term, while the bears will target a close below the $1600 level. Whichever side breaks first may be the side to which prices continue. The bulls have done a good job of absorbing much of the selling pressure seen in recent weeks. The bargain hunting buying seen during the last few months could eventually lead to an explosive upside move. The bulls appear patient and willing to wait. The bears, on the other hand, may be forced into a significant short-covering rally soon if the downside does not continue.

The dollar and the Fed likely hold the keys to gold’s fortunes. The Dollar Index is at the highest levels seen in years, while yields have also exploded higher to multi-year highs. If this trend stops or reverses course, the gold bears may get annihilated. The Fed could be the one to fuel such a reversal if it looks to take a pause or even loosen rates again.

Egypt does not appear to like the idea that its currency should be pegged to the U.S. Dollar. The new central bank governor and his team are already working on a new set of currencies and gold that would form a new currency indicator. In order to change the notion that Egypt is pegged to the dollar, it will create a new index that uses these currencies and gold to make an index for the Egyptian Pound.

Egypt and America are not major trading partners. It makes little sense, therefore, for the Egyptian currency to be pegged to the dollar. Even in the absence of a true peg, the idea that the pound is somehow pegged to the dollar seems irritating to Egyptians. They want their currency tlo be seen against every currency, not just the king dollar.

The commentary out of Egypt may be the latest salvo in the war against the dollar. For some time now, nations across the globe have expressed the desire to move away from the dollar as the global reserve currency of choice. Some countries, such as Russia, have already established means of transacting commodities, such as crude oil, not in dollars but in other currencies. Although the dollar is still considered to be the global reserve currency of choice, its days are likely numbered.

The dollar has not shown much weakness in recent months, that’s for sure. The Dollar Index now sits around the 112 level, an area it has not visited for many years. The Fed’s aggressive rate hikes and hawkish rhetoric have likely been a major catalyst for the dollar rally and could continue to act as such as long as the Fed maintains its current stance. If or when the Fed does reverse course, however, the dollar could find itself a long way from fair value with nothing to hold it up.

As a dollar denominated commodity, gold has a strong tendency to move in the opposite direction of the currency. As the dollar has risen in recent months, gold has lacked any upside and has declined. Should the dollar reverse and start declining, however, gold could find its way and return back to all-time highs or beyond. A major decline for the dollar could also drag treasury yields down along with it, also possibly boosting gold in the process.

The dollar has been the topic of much discussion in recent months, perhaps for the wrong reasons. Although the rally in the greenback has been impressive, the dollar could run into trouble. The U.S. remains in massive, massive debt with a tidal burden of over $31 trillion at this point. With rising interest rates, it may only be a matter of time before that debt becomes unserviceable. At that point, the U.S. could choose to default or to debase its currency. A currency debasement would lead to significant losses for those who are long dollars. At the same time, it could send gold skyrocketing into new all-time highs that could see the metal hit $3,000, $5,000 or even $10,000 per ounce in a very short period of time.

The gold market is being hit hard today as rising bond yields and a stringer dollar take their toll on the metal. Down nearly $20 per ounce, the gold market has now hit a three-week low. The yellow metal does not seem to have much going for it this week as risk appetite is a bit stronger and as earnings are coming out stronger than expected.

The dollar is bouncing from a two-week low today as treasury yields climb. Yields now stand at a 14-year high and could see even more upside if the Fed continues with its current plans to keep hiking rates aggressively. The Fed will be meeting again in early November, and as of right now the markets seem to be expecting another 75-basis point hike from the central bank. The Fed may then follow up its November hike with another hike of 50 to 75-points in December to finish off the year.

If the Fed does continue to hike rates aggressively, worries over a recession could expand further. The recession concerns have already fueled some market volatility in recent months and could send volatility soaring if a recession appears to be imminent. The Fed will obviously attempt to tread carefully as it looks to get inflation under control. Despite the Fed saying it believes it can quell inflation without causing a recession, markets do not like higher rates. If rates continue to climb, they may reach a breaking level at some point that could send the economy for a sharp slowdown.

Until that day comes, the markets may keep seeing some up and down price action. Despite worries over a recession, the economy still has a number of good things going for it that may keep investors out of gold and looking to get into stocks on any significant dips in value. The gold market may not see any sustainable upside until such time as a recession becomes “official” or the Fed decides to take a pause or reverse course.

Investors spent several months believing the Fed would eventually elect to take a pause and possibly even start easing rates again. This has not happened thus far, however, and the Fed has maintained its hawkish rhetoric for the time being. It is this rhetoric that may be boosting yields and the dollar and hence acting as a major obstacle to a gold recovery. The biggest question now is how long can the Fed maintain its hawkish stance? At what point might the Fed start to suggest that it could take a break or even start lowering rates again?

The day of reckoning for the Fed may arrive sooner rather than later. Once it does, the Fed will have to make decisions that could influence markets not only now but for many years to come. Their decisions will have the potential to send gold skyrocketing higher, and if so, you will want to own some of the metal before it does move sharply higher. That makes now the ideal time to not only buy gold at fire-sale prices but to enjoy the comfort that comes along with gold ownership whether it rises or declines in value.

The gold market is lower on Friday as a soaring dollar and rising bond yields take a toll on sentiment. Down nearly $30 per ounce as of this writing, the market is now back below the important $1650 level and could see a test of $1600 in the days ahead. Risk aversion is higher this week and is pushing stocks lower. Equities are at three-month lows today as concerns mount over Russia’s invasion of Ukraine and its threat to use nuclear weapons if threatened. Russian President Putin appears to have been pushed into a corner now, and that could make him even more dangerous according to some analysts.

Markets are also being driven by concerns over a recession. Earlier this week, the Fed Chairman fed into those concerns as he said the Fed would stay on track in its fight against inflation. Should the Fed continue with its aggressive rate hikes in the months ahead, stocks may come under increasing pressure and the bear market is likely to continue. The Fed will likely keep raising rates into the end of the year, what it does in early next year remains anyone’s guess at this point. In order to preserve what credibility it still has, the Fed may continue with its war on price pressures into next year, with interest rates eventually topping close to the 5% level. Powell did suggest that rates would then begin to come down again slightly in 2024 and 2025, but did not suggest the Fed would be looking to actively take them there.

The U.S. is not the only nation concerned about a recession. Recent data from the globe’s second-largest economy, China, have been weaker-than-expected. Unlike the U.S., however, China is taking the opposite approach and is easing policy to give its economy a boost. More weakness out of China may spell trouble for the global economy, and it could not come at a more challenging time. China’s troubles come at a time when the U.S. and other major global central banks are actively tightening policy to try to get inflation under control. The further these central banks tighten, the more pressure is put on the global economy.

The long-term narrative for gold remains quite bullish in our view. This means that any further declines in the value of gold now may represent an excellent long-term buying opportunity for the patient investor. The yellow metal could now see a decline all the way to the $1550 area before finding more solid footing. That might be OK with the long-term bulls, who would rather buy gold when it is on sale than at highly inflated prices.

Although the great turnaround for gold could take time to develop, it will come about at some point. When it does materialize, those who bought gold at current levels or even lower will find themselves laughing all the way to the bank. Those that didn’t may realize they have missed the opportunity of a lifetime.

Risk aversion in the marketplace remains elevated this week as markets prepare for another aggressive rate hike from the Fed on Wednesday. The Fed is widely expected to implement another aggressive rate hike of 75-basis points. Some have even priced in the chances of a full 100-point hike. Whatever the Fed does, the markets may be far more interested at this point in its commentary following the rate decision.

A large hike Wednesday appears to be fully baked into the cake. The Fed’s plans for the next few months, however, and early next year are still largely undetermined. Markets seem to be of the opinion that the Fed is likely to keep hiking through the end of the year. The central bank could, at that point, take a pause from its aggressive hiking. Perhaps the biggest question investors may have is whether the Fed will reverse course and decide to start easing policy at some point.

For now, the Fed appears to be determined to get inflation under control. The Fed has stated several times it feels inflation to be the biggest risk to the economy. That could keep the central bank tightening for a long period of time, as inflation still remains near 40-year highs. Markets have thus far not felt an overwhelming sense of dread at the prospect of higher rates. That could change, however, and change quickly if the Fed really continues rolling.

The Fed’s credibility is also at stake. If the Fed succumbs to the pressure of unhappy investors and politicians, it would seemingly suggest the Fed is not up to the task at hand. If the Fed does remain on course, it is likely to put pressure on stocks and risk assets and may keep investors running to cash. If the U.S. is not already in recession, one may become increasingly likely in the months ahead. The true test for the Fed may come at this point, when pressures mount to halt hiking or start lowering rates.

For the time being, and likely until the end of the year, the gold market may continue taking its cues from the dollar, yields and geopolitics. Any change in action or rhetoric from the Fed could have a dramatic impact on the dollar and yields, which have both benefited from the idea of higher interest rates. The dollar recently hit a 20-year high, for example, while yields also hit their highest point in some time. These assets both compete with gold, and their upside has limited gold’s a great deal. If they were to reverse course, the gold market could also reverse course and become a buyer’s market.

Gold remains on the defensive, for now, and may see lower lows before finding more solid footing. The market has tried to hold long-term support around $1675 but today appears to be failing. If the market does fail to hold this level on a closing basis, it could set the stage for a run lower, possibly all the way to the $1550 area before finding willing buyers.