The Fed Symposium has now come and gone, along with Chairman Jerome Powell’s highly anticipated speech this morning. The Fed Chief did not provide much in the way of new information, but did suggest the Fed was ready and determined to stay the course in its fight against inflation.

 

Powell reiterated the Fed’s thinking that inflation is the worst risk for the economy. He suggested that high inflation cannot make the economy work for anyone. While a recession is nothing to sneeze at, the dangers of a major economic slowdown may pale in comparison to the dangers that come with price pressures at their highest levels in some 40 years.

 

The FedWatch Tool did not show much, if any, changes to odds of a large Fed hike next month following the speech. Right now, odds are still eventually split for either a 50 or 75-point rate hike next month. Unfortunately for the markets, Powell did not seem to provide anything fresh or newsworthy in his speech but rather used it to reiterate the Fed’s previous statements. Without any forward guidance provided by the Fed, markets could find themselves second-guessing the central bank’s intentions in the months ahead.

 

The lack of clarity from Powell about how high the Fed could go or, perhaps more importantly, when it may decide to reverse course and start lowering rates again, could fuel market volatility in the fall. Powell did mention the easing of policy, though, and suggested the Fed would have to be very careful not to begin easing too soon.

 

Powell’s comments may be a bummer for policy doves. The Fed does seem intent to keep fightin inflation for the time being. That fight will likely last well into next year or beyond, and rates could find themselves going higher during that time than anyone previously anticipated. The gold market may find itself moving little, if any, up or down and could spend much of that time moving sideways as fresh inputs are awaited.

 

Volatility has largely dried up once again in the gold market, but that will not last forever. The $1700 and $1800 levels remain key technical points that could determine market direction in the months ahead. Neither the bulls nor the bears have been able to produce a close above or below these levels. Once they do, however, the yellow metal could continue in that direction for some time. Given the bullish long-term narrative for gold, odds may favor an upside move or a downside. If the market does try to move lower, the bears may find themselves running into a brick wall of willing bargain hunters.

As market volatility dries up further, gold may become increasingly likely to make a significant move in either direction. Once the metal does start to move again, it could continue in that direction for some time or until fresh market influences are seen,

 

Powell’s hawkish commentary is weighing on the metal today and may continue to do so until the Fed meets again next month.

The gold market is higher in early action Tuesday after starting the day off on a weaker note. Spot prices are up some $15 per ounce and are now back above the key $1750 level. The bulls have been reawakened today as some weaker-than-expected economic data could be changing market opinions about the Fed and its plans for interest rates. The latest piece of data, Flash PMI, fell more than expected and follows a weaker-than-expected new home sales figure.

 

Both weak data points could point to recession on the horizon, if the economy is not in one already. Fears of a recession may be guiding market action today. If more data is released and is weaker-than-expected, the markets could assume that a recession is increasingly likely. These fears have the potential to affect the Fed and its decisions regarding monetary policy. With still a few more weeks until the FOMC meets again, markets could see heightened volatility and possibly even some major selling of the data stream remains on the weak side.

 

The Fed will be together this week in Jackson Hole, Wyoming at the annual Fed symposium. While nothing new is expected from the Fed at this point in time, Chairman Jerome Powell is scheduled to deliver a speech Friday at the conclusion. Powell could provide some meaningful clues about the central bank’s plans and thought process going forward. The symposium has, in the past, provided investors with useful tips on the bank’s plans and outlook.

 

Regardless of what the Fed does or does not do next month, the economy is at risk for recession. While many were of the opinion that the Fed may begin to pivot away from the inflation fight next month, the Fed may do just the opposite. Powell has said that the Fed believes inflation to be the greatest risk to the economy. Not allowing inflation to become entrenched has been a priority for the Fed, and it may be unlikely to change its tune any time soon. Having already backed itself into a large corner, the Fed may now do what it can to preserve what little, if any, credibility it has left. Doing so means the Fed is unlikely to suddenly change its plans or to reverse course.

 

Odds are good that the Fed will hike rates at least a couple more times before assessing its actions and its options. This could coincide with the central bank thinking about a course reversal early next year. Perhaps one or two more aggressive rate hikes will prove to be more than markets can bear. If stocks and risk assets really begin to slide, one has to wonder if the Fed will be just as willing to stick it out and continue hiking while also shrinking its balance sheet.

 

Gold may remain in neutral until more is known about the Fed’s plans. The key areas of $1800 and $1700 remain in play. Whichever side is penetrated first, on a closing basis, could be the side of the market that sees price action for months to come.

The gold market is lower in late morning trade Friday as a stronger dollar takes a toll. The yellow metal is now near the $1750 level as the bears have distanced the market from the key $1800 mark. The pullback in prices should not come as much of a surprise, however, following gold’s recent upside trajectory.

 

The battle between key technical levels in gold may continue for the time being. The bears are looking to produce a close below $1700 while the bulls need a close above $1800.  Now right in the middle of these two levels, the yellow metal could remain stuck in neutral for a few weeks until the next FOMC meeting in September.

 

The path the Fed chooses to take next month may determine gold’s fortunes for the months ahead. The big question is whether the Fed will continue its inflation fight or if it will elect to abandon the inflation battle. Following the latest FOMC meeting, Chairman Jerome Powell seemed to suggest the Fed could decide to pivot away from the inflation fight. His more dovish commentary was seen as being exactly that. Many analysts felt Powell was laying the groundwork for a Fed pivot away from inflation in the months ahead, possibly as soon as next month.

 

Powell may not decide to give up the inflation battle, however, and could keep the Fed hiking rates aggressively through the rest of the year. Should Powell’s rhetoric sound more hawkish next month, the gold market could potentially struggle. Should Powell sound more dovish, however, it could give gold investors a green light to buy.

 

While there may be more hope for a dovish Fed next month following the last meeting, the Fed may be unlikely to reverse course at this point. The central bank has previously indicated it believes inflation to be the biggest economic risk and that it does not want to allow price pressures to become entrenched. The Fed seems willing to let the economy enter recession (it it hasn’t already) and appears far more concerned about inflation than a few quarters of slow to zero growth. This could keep the central bank raising rates aggressively through the end of the year and possibly longer.

 

The gold market could remain sideways until more is known about the Fed’s plans. The $1700 and $1800 levels remain key. Whichever side is violated first, on a closing basis, may indicate how gold could run in the months ahead. As the summer doldrums come to a close in the next few weeks, higher volumes may allow for gold to make a sustainable move higher or lower. Volumes will be back by the time the Fed next meets, and that meeting could dictate gold’s fortunes for the months ahead.

The longer the metal spends between the $1700 and $1800 levels, the more it could potentially move once it breaks out of the recent range. An upside breakout above $1800, for example, could send the market rapidly back to all-time highs or well beyond.

The gold market is off on Wednesday morning as concerns over demand take a toll. The weaker-than-expected data out of China this week combined with already-robust concerns over a U.S. recession may be more than the gold bulls can bear. Spot prices are slipping again today, down over $10 per ounce in early action. Outside markets are also working against gold today, as the dollar and treasury yields are both moving higher.

 

Markets are awaiting this afternoon’s release of the latest FOMC meeting minutes. Investors will closely scrutinize the minutes, looking for any clues about the possible timing and degree of further rate hikes from the Fed. The Fed Funds markets are currently pricing in even odds of a 50 or 75-point rate hike in September.

 

The Fed and its plans may dominate trading headlines in the months ahead. If the Fed maintains its aggressive policy posture, it has the potential to put the U.S. into recession. If the Fed takes a pause or reverses course, however, it could allow inflation to run real hot while possibly keeping stocks and risk assets intact. Many analysts have suggested the Fed could step away from its inflation fight. Fed Chairman Jerome Powell seemingly suggested after the last meeting that the central bank could begin to pivot away from the inflation battle. Seeing as how the Fed may be unable to get inflation under control, this could arguably make some degree of sense.

 

Others feel the Fed will stay the course, however, and keep hiking interest rates aggressively. The Fed has said it feels inflation to be the worst threat for the economy and that should it become entrenched, it would be even more problematic. The Fed may already be too far behind the curve to affect inflation, however, and may have no choice but to abandon its aggressive rate hikes to prevent a full-blown recession from hitting.

 

Should the Fed signal it will ditch the inflation war, gold could benefit handsomely. Without the current threat of even higher rates, the opportunity cost argument for lower gold may be gone. Not only that, but without the Fed taking aggressive action, price pressures could become even worse before getting better. Higher inflation could add to gold’s attractiveness as investors look to preserve wealth and protect purchasing power.

 

The gold market remains stuck in no man’s land for the time being. The bulls need to produce a close above the $1800 level. The bears are targeting a close below the $1700 level. Whichever side of the market produces a close first may win and prices could trend in that direction for some time.

 

Despite the recent rally by the bulls, the bears are still in control on the daily chart. They may, therefore, have the advantage when push comes to shove. A close above $1800 by the bulls could negate the bearish price action, however, and send gold quickly back to all-time highs or beyond.

The gold market is off to a tough start as the trading week gets underway. The yellow metal is being sold off hard today in early action as some disappointing data from China takes a toll. The recent Chinese data showed weakness in July for real estate, factory output, investment, and more. It has added to already-robust fears of a global recession this year.

 

The poor Chinese data comes at a tricky time for central banks as well. The Central Bank of China is now going to lower interest rates and boost liquidity to support its weakening economy. This move comes at a time when the U.S. and many other global central banks are trying to raise interest rates to battle inflation.

 

China is the world’s second-largest economy. Its central bank actions could have a dovish impact on other central banks. The move by China to lower rates could give the U.S. Fed something to think about as its next FOMC meeting approaches. There are still several weeks until the Fed does meet again, and it will therefore also get the opportunity to scrutinize more economic data before making any decisions on rates.

 

The idea of whether rates rise further from here may become increasingly important as trading volumes return in a few weeks. If the Fed elects to keep up the fight against inflation, it could keep stock investors on the defensive. If the Fed decides to abandon the fight, however, it could encourage buying in stocks and risk assets.

 

The lowering of rates by China this week may keep the Fed hawks at bay. China is the world’s second-largest economy and thus could have a dovish influence on other global central banks. Whether it keeps the Fed from another aggressive rate hike next month remains unclear, but it will certainly give the Fed something to think about.

 

The Fed may have already laid the groundwork for pivoting away from the inflation battle. Chairman Jerome Powell said the Fed would rely on the data stream to determine if more rate hikes are appropriate. The Fed seems very unlikely, however, to take rates to where they may need to be to fight inflation effectively. That is why the central bank could elect to let inflation run its course.

 

If the Fed does decide to put a halt to its inflation battle, stocks and risk assets may see renewed buying interest. The notion of higher rates could disappear and do so quickly if the Fed sends the message it is giving up. Removing the threat of higher rates could dramatically change market dynamics, and gold could possibly benefit as well as the opportunity cost dwindles.

 

The yellow metal could remain largely sideways in the weeks ahead. Once trading volumes return in early September, however, the market could make a more sustainable run higher or lower. The bulls and bears still have the same initial targets for now: $1700 on the downside and $1800 on the upside. Once either level is broken on a closing basis, the market could continue to run in that direction for the next several months or longer.