The gold market is getting the new trading week off to a decent start. Some short covering and bargain hunting has lifted spot gold prices Monday by over $4 per ounce. While the day’s gains are nothing to write home about, they do put the bulls in position to again challenge resistance at the $1800 level. After breaking through that level recently, the bulls failed to extend the rally with a run through resistance in the $1850 area. Prices declined heavily in recent trade, sending the gold market back below the $1800 level and putting the bulls on notice.

Both gold and silver are oversold on a short-term basis. This condition could lead to further upside this week as the market figures out where it wants to go from here. Outside of the oversold condition, the bulls do still have some upside ammunition that could set the stage for a rally.

Inflation remains -and likely will remain for some time-a topic of great concern. The Fed has now acknowledged the problem that rising price pressures is posing, the question is what might it be able to do about it. After falling far behind the inflation curve, the central bank now has three rate hikes penciled in for the year ahead. With the first of those hikes likely taking place in March, the Fed could also hike further than anticipated or at a much faster pace. Whether the Fed hikes more than three times or ratchets up the pace of hikes, the effects will likely be the same. Stocks are likely to trend lower, possibly even seeing some heavy selling and heightened volatility along the way.

As the period of easy money is left behind, the markets will see new dynamics that could make not just this year very challenging but the next several years. The notion of lower equity markets combined with rising inflation is not a good mix, and investors may have little choice but to seek out viable alternatives. While cryptocurrencies such as Bitcoin could see renewed interest and upside, their volatility could keep any upside and investor interest somewhat limited. This could potentially leave gold as the only truly viable alternative asset class for investors to turn to. That demand has the potential to drive gold to new all-time highs and beyond and may keep any dips in the market insignificant over the long run.

As the Fed gears up to begin its policy tightening in the weeks ahead, markets may see an increasing wave of volatility. That volatility may also be driven by other factors as well, including the recent terrorist attacks on the UAE, higher crude oil prices and exceedingly hot inflationary data. This could keep the gold market in a sideways, range-bound type of framework for several weeks or longer. In the meantime, the bulls will keep their sights on the $1850 level, while the bears’ next downside target remains the $1775 level.

The gold market is seeing some moderate selling pressure today as investors await the conclusion of the Federal Reserve Policy meeting. Although no action is expected from the central bank today, markets will be paying close attention to the Fed’s commentary as well as thoughts from Fed Chairman Jerome Powell following the meeting conclusion. Powell’s press conference today may be more involved than usual, as investors weigh the potential for a Fed rate hike as soon as March.

The Fed is expected today to lay out its plans for the first of several rate hikes in March. Jerome Powell is likely to have his hands quite full, as markets will want to understand the Fed’s thinking on how it plans to deal with persistent price inflation and other factors. In addition to the Fed and the possibility of three or more rate hikes this year, market participants are also concerned over the possibility of a Russian invasion of Ukraine. Russia has stationed many troops along the Ukraine border in a move that seems poised for an attack. Heightened U.S./Russian tensions come at a bad time. There have been multiple terrorist drone attacks in recent weeks in the United Arab Emirates with one of those attacks striking a strategically important oil facility. As crude prices shot up in the aftermath, it was a prime demonstration of how fragile the global oil market remains to be.

In addition to the several geopolitical issues currently taking place, markets will also consider how much hiking the Fed may have to do this year. The central bank currently has penciled in three rate hikes for the year ahead. Numerous analysts believe, however, that there will be at least four or five rate hikes this year as the Fed looks to get problematic inflation under control. The threat of several hikes has already breathed some fear into the markets, with stock market volatility seeing a significant upswing in recent weeks. A period of increased volatility could be in store, and such market conditions could potentially give the gold market a big boost as investors seek alternative places to put capital to work. In the meantime, any exceedingly hawkish commentary from the Fed or Fed officials could give investors reason to sell stocks and head elsewhere.

The gold market remains near key overhead resistance in the $1840 to $1850 area but has yet to mount a serious challenge of this area. Even with today’s decline of nearly $20 per ounce, the market remains in firm striking distance of resistance at the $1830 area. The gold bulls could very well attempt a challenge of resistance on the next major stock downturn day, a bearish day for the dollar or a highly bullish day for crude oil prices. Whatever the case may be, the gold bulls are within a day of testing this key resistance and that may hold the key to further upside in the current cycle. The bears, on the other

hand, will target first a close below the $1800 level and then a test of $1775. A breakdown below $1775 on a closing basis could signal the end of the current rally and further downside could be seen as bearish momentum builds.

The gold bulls appear to be gaining momentum today, as spot prices are sharply higher in early morning action. Gold is up over $24 per ounce as inflation fears again drive buying. Silver has notched a seven-week high while gold is pushing up against a key resistance level. The next few sessions for gold could be very telling. If the market is able to overtake the resistance in the $1840 to $1850 area, it could be off to the races and see a rapid and sharp rise in value that could push it back towards previous all time highs.

Risk aversion is heightened at mid-week as numerous geopolitical issues are in play. Russia appears to be readying for an invasion of Ukraine, as it has placed well in excess of 100,000 troops along the border. A Russian invasion of Ukraine could potentially pull the United States into the conflict, and one can only imagine how a U.S./Russian conflict could take shape. In addition to the Russian threat of Ukraine, North Korea is back to its old tricks in recent days, again test firing missiles. The United Arab Emirates were attacked just a few days ago by terrorists in a move that has fueled a price spike in the crude oil market. Oil is now trading at a seven-year high, fetching almost $87 per barrel.

Stronger crude oil prices will likely fuel further concern over inflationary pressures and could even slow economic activity if prices get high enough. As oil approaches the $100 per barrel level, it also begs the question of if the U.S. will release some of its crude reserves to lower prices in the marketplace.

The threat of lasting inflation seems to be on the rise. Overnight, the U.K. reported its Consumer Price Index at the highest level in three decades. The 5.4% rise for December year-over-year will likely give markets something else to worry about and may give the Central Bank of England more to ponder as it lays out monetary policy.

Dollar weakness today may also be giving gold a boost, although that boost may be limited by treasury yields. The benchmark 10-Year Treasury is currently yielding 1.89% and seems poised to try to rise to 2% or higher in the weeks ahead. The 10-Year German Bond has risen into positive territory for the first time in nearly three years today, currently fetching a yield of .008%.

The rise in yields is something that could continue to weigh on the gold market. The higher yields could be offset, however, by a weaker dollar, geopolitical risks and the threat of inflation. For the time being, the gold bulls are still in control of the daily chart, and with today’s solid upside are looking to solidify that control. An important test of resistance could be seen in the days ahead, and if gold is able to stage an upside breakout, the market could blast higher in short order.

The gold market is slightly lower in mid-morning trade Friday. The yellow metal is not showing much of a reaction to changing inflation expectations and a corresponding drop in consumer sentiment data. The latest University of Michigan Consumer Sentiment data declined to a reading of 68.8, down from the previous month’s reading of 70.0. The decline, according to some analysts, can be attributed to the survey’s inflation expectations.

According to the survey, inflation expectations for the year rose to 4.9%, up a tick from the previous month’s reading for a rise of 4.8%. The longer-term 5-10 year inflation expectation reading also saw a climb, rising to 3.1% from a previous reading of 2.9%.

Inflation data has been the talk of the town in recent months, and this week was no different. In addition to today’s data, the Consumer Price Index (CPI), released earlier this week, showed a rise of 7%.

The threat of rising and ongoing inflationary pressures may keep investors on their toes in the months ahead and could fuel market volatility in the year ahead. The Fed has already said it will taper its monthly security purchases at a faster rate and has penciled in three rate hikes for the year ahead. Whether three rate hikes will be enough is the subject of debate, as numerous analysts, including an economist from Goldman Sachs, have suggested the Fed will need to hike rates a minimum of four times to get inflation under control.

The notion of rapidly rising interest rates could put stock investors on edge and may also be a major factor for market volatility in the year ahead. The Fed certainly does not want to upset equity investors or send waves through the markets. The central bank may be forced, however, to decide whether to let inflation run hot or risk a major stock market sell-off and reversal. The Fed now seems willing to let equities turn lower and appears more focused on the risks posed by inflation than employment or other issues. An increasingly aggressive Fed could not only fuel selling in stocks and risk assets, but may actually also drive buying in gold and perceived safe havens. In fact, the gold market may begin to really rally and eventually break out of its trading range to the upside once the Fed does start to raise rates. This may be contrary to popular belief but has happened before and is likely to happen again.

Gold remains in its trading range for the time being, but has shown some positive sign in recent weeks. The bulls have been able to take gold back above the key $1800 level on a closing basis and will now set their sights on resistance in the $1840-$1850 area. A breakout above this could pave the way for much higher prices in a short period of time. The bears will continue to look for a breakdown. The first target for the bear camp is taking gold below the $1800 level. From there, a decline below $1775 would be next.

The gold market is under significant selling pressure again today as investors react to Wednesday’s release of the latest FOMC meeting minutes. The minutes were decidedly more hawkish in nature and suggested the Fed could start raising interest rates sooner than expected or more than expected. The market seemingly was caught off-guard and both stocks as well as gold were hit in the aftermath.

The minutes suggested that inflation concerns currently outweigh the economic risks presented by the Omicron variant. Fed Funds futures markets now point to a greater than 70% likelihood of a rate hike in March.

Despite the Fed minutes, the central bank will have to walk a very tight rope in order to accomplish its objectives. The Fed now seems very far behind the inflation curve and perhaps ready to take action. That action could, however, upset the economic balance and fuel a massive sell-off in stocks or an equity market reversal. Although the Fed will try to avoid rocking the boat as much as possible, it seems to now find itself backed into a corner from which there is no simple escape. As the Fed looks to normalize policy and quell inflationary pressures, it risks causing a significant economic slowdown or possibly even a recession. These risks may point to heightened volatility in the months ahead, an issue which could be bullish for gold and perceived safe haven asset classes.

Demand for physical metals remains strong despite some of the headwinds that may be on the horizon. The U.S. Mint recently reported that sales of its iconic American Gold Eagle coin were the strongest last year since 2009. The gold buying was not limited to seasoned investors, either, as new investors also got on board the gold train and started buying bullion.

The year ahead looks as if it might also see stringer bullion demand. As inflationary pressures mount further, investors may seek out gold’s perceived safety and wealth protection. If stocks do weaken based on higher interest rates, investors could also seek gold as a viable alternative that can offer protection not just from inflation but from a weaker dollar and geopolitical risks. Despite gold’s recent weakness and downside, the market has remained within its trading range and no significant damage has been done to the bullish case. That being said, however, the bulls will need to show some strength and show it soon or risk further selling pressure. The bears are targeting the $1775 level currently. A breakdown below this area on a closing basis could open the door to far more significant selling pressure that could see prices dip as low as $1600 before taking a pause.

The bulls will continue to look at resistance in the $1840 area as a next target. Given today’s slide, however, the bulls will first need to take the market back above the $1800 level on a closing basis before more momentum may be seen.