The gold market is higher, albeit not by much, as the markets figure out which way they wanna run in the aftermath of another inflation report that came in not as hot as expected. The lower inflation data may be a positive for risk assets such as stocks, and that may keep some selling pressure on the gold market. The Producer Price Index released this morning showed a decline of .5% and a year-over-year rise of 9.8%. The data is another sign that inflation could have possibly peaked and may give the Federal Reserve something to think about when it meets again next month.

Risk appetite has improved today as the combination of yesterday’s lower CPI figures and today’s PPI data give markets something to consider. If inflation has in fact already peaked, it stands to reason that it could trend lower in the months ahead. This could not only give the Fed reason to consider a pause from its rate hikes, but may also boost stocks and risk assets along the way. Should equity markets react favorably to the data, it could make it more challenging for gold to gain upside traction.

The dollar is weaker following the inflation data today and yields are steady. These have both posed serious roadblocks to higher gold in previous months and may continue to do so unless current trends are reversed. The dollar has been riding high on the notion of higher interest rates and an aggressive Fed. Should the central bank decide to take a pause, however, or if it elected to reverse course and start easing, the dollar could see much of its hot air let out rapidly. Dollar weakness may also affect yields, and yields could potentially decline alongside the currency.

A declining dollar and lower yields could pave the way for a sustainable run higher in gold. Until such time as those occur, however, the bulls may remain stymied in the face of an aggressive Fed, higher rates and other geopolitical factors. The gold market may have a tough time moving higher at this point regardless of whether inflation is rising or easing. The bulls will need to produce a close above the $1800 level to get things going.

The market is well within striking distance of the $1800 level and such a test could be seen today or in the next few sessions. Should the bulls take this level out, it may attract a fresh wave of buyers that could propel the metal higher and do so quickly. This could even put the $1900 area within reach. A test of $1900 could be key, as a close above it could set the stage for a rally that could run all of the way back towards previous all-time highs.

With several weeks until the next FOMC meeting, the markets will have to weigh the data stream and consider the Fed’s options. Markets were expecting another 75-point rate hike coming into today. That forecast may have changed, however, in light of the less inflationary data released this morning.

The gold market is a bit quiet Tuesday as investors await some key inflation data due out this week. On Wednesday, markets will get the latest reading on the Consumer Price Index, or CPI. Thursday will feature the latest reading of the Producer Price Index, or PPI. The CPI data is expected to register a reading of 8.7%, following last month’s rise of 9.1%. PPI is expected to come in up .2% from its June reading.

The inflation data for release this week could be market-moving. It also has the potential of changing the Fed’s thinking over the next several weeks. Should the data come in as or hotter-than-expected, it could give the Fed a green light towards raising rates aggressively further in the months ahead. Should the data miss or come in lighter-than-expected, however, it has the potential of leading the Fed to the conclusion that it can afford to take a wait-and-see approach in the coming months.

With no FOMC meeting taking place in August, markets will have to await the September meeting for any decisions on rates. That extra time provides an ample opportunity for the Fed to closely examine the data stream and determine if it really needs to continue hiking at the pace it has already set. Markets are currently expecting another 75-point hike next month. Should the data stream soften, however, or should the inflation data point to a possible peak having already been reached, then the Fed may opt to consider taking a less aggressive approach. This could mean a smaller hike next month of 50 or even 25-points or even no hike at all.

In his latest commentary, Fed Chairman Jerome Powell seemingly suggested the Fed could pivot away from inflation fighting. While not overly dovish, his remarks did not strike the same hawkish chord of previous commentary. That led many to assume that Powell was laying the groundwork for the Fed to move away from inflation fighting and possibly start worrying more about the economy. The economy has slowed, although much of the data, including last week’s jobs data, remains quite strong.

The Fed may now find itself in a challenging conundrum. The central bank is way behind the inflation curve already. Regardless of whether it keeps hiking rates or not, the Fed is unlikely to catch inflation or even put a major dent in it without taking rates to Volcker-era levels around 20%. This is extremely unlikely, and the Fed may therefore elect to abandon its fight against inflation.

More may be known about the Fed’s plans next month as the FOMC meeting takes place. If the Fed does decide to pause its rate hikes or even reverse course and start easing again, markets may become confused. This could lead to a spike in volatility and widespread selling across asset classes. Gold may stand to benefit, however, as the opportunity cost would not be rising and could possibly even decline.

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.