The gold market is seeing some buying activity to kick off the new trading week, as a degree of risk aversion appears to be creeping into the marketplace. Over the weekend, numerous geopolitical developments took place that could potentially drive investors into more of a “risk-off” mindset.

Unfortunately, another terrorist attack has taken place in London. The attack left several dead and many injured, and ISIS has reportedly claimed responsibility. Also over the weekend, Saudi Arabia, Egypt and some other Middle East nations have reportedly cut ties with Qatar, accusing the nation of taking actions that are destabilizing for the region.

Both of these developments may be on investors’ minds, however, they have thus far not had a significant impact on global markets. Sadly, such terrorist attacks have become so common that they do not have a major impact on financial markets anymore.

This week is on the lighter side of the ledger in terms of economic data, but that doesn’t mean that there won’t be plenty of things for investors to chew on. Thursday will be the main news day of the week, with U.K. general elections getting under way, the ECB holding its monetary policy meeting and former FBI Director James Comey testifying before the Senate Intelligence Committee.

Comey’s testimony could potentially stir markets-and risk appetite-if it bolsters the idea that President Trump sought to obstruct the FBI investigation into alleged Russian ties with the Trump campaign.

Virginia Senator Mark Warner was quoted in a recent article from CNN.com as saying “Clearly, it would be very, very troubling if the President of the United States is interfering in investigations that affect potentially the president and his closest associates.”

The testimony represents a great risk for the administration after numerous denials of any wrongdoing or attempts to influence the FBI investigation. If Comey testifies that he is convinced the President was in fact trying to influence the investigation, it will likely raise even more questions as Congress attempts to determine if justice has been obstructed.

Needless to say, such a scenario could have a major impact on the U.S. Government and financial markets, and could fuel a major stock market sell-off while giving investors reason to move to perceived safe haven assets.

Outside of the geopolitical sphere, the Federal Reserve will also be meeting later this month to conduct its meeting on monetary policy. It is widely expected that the central bank will lift rates once again by 25 basis points. In fact, Fed Funds futures contracts are pricing in over a 95% chance of another hike this month.

The question will become, however, whether or not the central bank decides to take a softer, more dovish tone going forward following some disappointing economic data. More dovish rhetoric from the Fed could give gold and metals a boost, while a more hawkish tone could potentially weigh on the complex. In addition, recent dollar index weakness could be exacerbated if the Fed signals a slowing pace, and any further declines in the greenback will likely be very supportive for gold and other dollar-denominated assets.

The gold market has found itself on more solid footing in recent action as a mix of geopolitical issues and poor economic data drive buying. Although gold has been trending higher in the past couple of weeks, the question becomes whether or not the yellow metal will see enough capital inflows to breach its recent high around the $1300 level.

There is no question that the safe haven bid has been very supportive of gold, and with so many wildcards being seen right now in geopolitics, it is difficult to imagine a scenario in which safe haven buying in gold substantially dries up.

Investors will continue to monitor the any further developments concerning the Trump administration and the investigation into potential Russian meddling in the recent Presidential election. The recent firing of FBI Director James Comey along with the appointment of a special counsel to oversee the ongoing investigation into potential Russian interference are not likely to do overall investor sentiment any favors.

In the meantime, investors will also turn their attention back to the data stream and the upcoming Fed meeting minutes, due to be released later this week. It is a very busy week from a data standpoint, with markets getting the latest readings on key pieces of economic data including New Home Sales, Weekly Jobless Claims, Durable Goods Orders, GDP and more.

The Fed will likely be paying very close attention to the latest data, as some recent disappointments have fueled some speculation about the central bank possibly delaying an anticipated June rate hike. All things being equal, however, the Fed does appear set to continue with its previous plans of a June hike and another rate hike coming before year’s end.

The Fed meeting minutes this week may reiterate that the central bank remains on track to hike next month. Although a more hawkish tone from the central bank could deflate the gold market a bit, the market has likely already fully discounted two more hikes from the central bank this year. A more dovish tone, however, could fuel a significant amount of buying in gold that could potentially set up a test of the recent highs.

The dollar index will also be closely watched by investors, as the greenback has sunk to a fresh six month low. The dollar has now given back all of the gains seen after the Trump election victory, and appears poised for even more downside.

Recent price action in both gold and silver has been constructive. That being said, however, the markets may require a fresh bullish catalyst in order to breach their respective recent highs. This catalyst could potentially come in the form of a stock market collapse, a surprisingly dovish Fed or numerous geopolitical influences.

For the time being, the metals markets appear to be finding buyers on any significant sell-offs, and in the absence of any fresh catalyst appear to be quite comfortable in their recent trading ranges. This could potentially be viewed as an opportunity for accumulation, as any upside breakout in the metals complex could be quite significant.

It was seemingly only a matter of time before North Korea tested another missile, and over the weekend the nation did just that. North Korea reportedly launched a Hwasong-12 missile on Sunday that reached an altitude of 2111.5 kilometers and covered a distance of 787 kilometers.

This latest provocation by North Korea is likely to keep markets a bit on edge, and may revive the flight to safety bid in metals and other hard assets.

The rhetoric has heated up considerably from both the U.S. and North Korea since Donald Trump took office in January, and it appears that the two nations could unfortunately be headed for a military conflict. Although many do not believe that North Korea has the capability-at least not yet-to strike the U.S. mainland, the nation could target Guam or other U.S. interests in the region.

Prior to the weekend missile launch, investors had been focused on the recent firing of U.S. FBI Director James Comey. The firing of Director Comey by the Trump administration appears to have raised numerous red flags, and some believe that Comey’s dismissal was essentially in retaliation for the ongoing investigation into potential ties between Trump’s campaign and Russia.

There is sure to be more headlines regarding this situation, and it is an issue that could potentially have far-reaching consequences. Some believe that Trump has abused his power, and talk of a “constitutional crises” is on the rise.

The ongoing conflict surrounding the administration could make it very difficult, if not impossible, for the President to get key legislation passed. In fact, the issue is just another of several that are acting as a significant distraction from the work at hand.

Recent discussions of an angry and frustrated Donald Trump possibly looking to shake up his staff may only add to the confusion and worry that seems to be hanging over the White House currently.

Although the stock market looks set to open the new trading week in the green, you have to wonder how much longer stocks can keep marching higher given the amount of geopolitical issues currently being faced. In fact, any one of a number of issues right now has the potential to fuel a significant sell-off in stocks and a massive spike in volatility. Such a scenario could potentially be extremely bullish for gold, and the yellow metal could see significant inflows of investment capital.

Not to beat a dead horse, but it is important to keep in mind that the rally in stocks over the last several months has been largely-if not entirely-based on the notion of tax reform and fiscal spending. At this point, it looks like any tax reforms are off the table for this year, and investors are still awaiting fiscal spending plans.

The more conflict that is seen around the Trump administration, the more difficult it may become to implement these key policies. If progress is not being seen, and if investors begin to get more anxious, the Fed could even elect to hold off on another rate hike in June. Although this may appear unlikely at this point, things can change in a hurry and a sizable sell-off in stocks could make the central bank think twice before taking action again. 

As far as the gold market goes, the week ahead could be a busy one. The trading week will be packed with key economic data, the May FOMC meeting announcement, speaking engagements with various Fed officials and more.

This week could potentially turn the recent tide of weakness in gold, or it could put considerably more pressure on the yellow metal.

On Friday, markets got the latest reading on first quarter GDP which was well below consensus estimates of 1.1% with a reading of just .7%. Consumer spending was a significant drag, as it rose at a rate of just .3%, the worst reading since the fourth quarter of 2009. While the overall report could be considered mixed, the lack of growth in consumer spending could potentially be indicative of recession.

This weaker than expected GDP figure could make this week’s FOMC meeting a bit more interesting. Although markets are pricing in only a very small chance of a rate hike from the central bank this week, the Fed may offer some significant clues about its plans going forward and its overall assessment of economic activity.

Fed Funds futures contracts are still pointing to a very strong likelihood of a June rate hike from the central bank, although numerous issues could potentially put the Fed in a difficult position.

Friday’s poor GDP data may give the central bank a reason for pause, and could increase any concerns the Fed may have about extinguishing growth by being overly aggressive in its efforts to normalize monetary policy.

Not only does the Fed have to contend with the GDP figures and some other areas of economic weakness, but it may also weigh the current geopolitical landscape as well. In addition, if the Trump administration does not make more concrete progress on some of its key policy initiatives, investors may become nervous and the stock market could potentially begin to slide-a development that the central bank could also consider.

All in all, the Fed could very well find itself between a rock and a hard place as it considers rising price pressures with the possibility of slowing economic activity. Ongoing tensions with North Korea and Russia may only complicate matters further, and markets could be vulnerable to increasing volatility in the coming weeks and months.

What all of this could mean for gold remains to be determined. The yellow metal has been pulling back in recent trade, although its uptrend remains intact.

A more dovish tone from the Fed this week could send gold back to its recent highs or beyond, while a more hawkish tone could potentially fuel further downside pressure. The market may not fall far, however, given the current state of geopolitics and what appears to be increasing chances of military action against North Korea.

Investors and the gold market will also continue to pay attention to the French elections, with the next round of elections to take place on May 7th. This election, and other upcoming European elections have the potential to make or break the European Union as it exists today and could have far-reaching effects on global financial markets. 

The geopolitical world has certainly seen some changes since Donald Trump took office in January. Although the vast majority of discussions have been centered on Russia and China, recent headlines would seem to suggest that North Korea currently poses the biggest threat to U.S. national security.

The last several weeks have seen the U.S. launch a military strike against a Syrian airfield in retaliation for a chemical weapons attack that killed numerous innocent civilians. Although there has been some debate about the tomahawk missile strikes ordered by President Trump last week, many have also applauded the fact that action was taken.

The strike against Syria has fueled tension between the U.S. and Russia.

North Korea has seemingly continued in its pursuit of a nuclear weapon, and recent actions appear have been in direct defiance of the U.S. and its allies.

The parade in North Korea this past week was called a celebration, but also seemed to be an excuse for the country to showcase some of its arsenal. Unfortunately for the U.S., the North Korean arsenal that was on display appeared to be far more advanced than military and intelligence officials previously thought, adding to rising concerns over the nation’s capabilities.

On Sunday, the country attempted another missile test that failed according to U.S. and South Korean defense officials. Recent reports said the type of missile that was being tested has not yet been determined.

This failed test is being seen as another provocation in a series that could eventually lead to military action.

There are discussions already being had about a U.S. offensive to take out North Korea’s nuclear program, and unfortunately such a scenario could be getting closer than many of the public assume.

For right now, the U.S. is hoping that China will assist by exerting its influence. What steps China may be willing to take, however, remains unclear.

This issue is just one of several that could keep the gold market well-supported in the near term.

Also bullish for gold is the notion that the Federal Reserve may have to keep further rate hikes on hold. Recent jobs data was disappointing, and other economic indicators are also showing some signs of lackluster activity.

The bigger story could potentially be concerns over the Trump administration’s ability to pass its highly-touted tax reform and fiscal spending plans. The recent failure to repeal the Affordable Care Act has likely fanned those fears further, and if the administration is unable to move forward on these key issues markets could be setting up for a major downside reversal.

Such a scenario could also fuel selling in the dollar index, which would likely add to the yellow metal’s allure.

The gold market appears poised for further gains as its technical posture has improved significantly and as the geopolitical situation has become much more serious. Geopolitics will likely be the main driver of gold prices in the near-term, however, any data disappointments or dovish rhetoric from the Fed could also be supportive for the yellow metal.