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The gold market is higher in early action Thursday as the bulls see a slight reprieve from recent selling pressure. Spot gold is higher by less than $5 per ounce, however, and has several hours to maintain those gains for a positive daily close. Gold hit a fresh 8.5-month low this week while silver also hit a 2-year low. Among the bearish factors affecting the metals markets are a stronger dollar (which hit a 20-year high this week) and declining crude oil prices which have fallen below the $100 per barrel level.

The gold and other markets have quickly digested yesterday’s release of the latest Fed meeting minutes. Markets are now pricing in a very high likelihood of another 75-basis point rate hike this month. How the Fed elects to proceed after the next FOMC meeting is unknown, however. The Fed will almost certainly continue to raise rates as it sees fit, although the size of those rate increases remains the subject of debate. After hiking rates not once but twice by 75-points, the Fed could easily decide to go a little easier and only raise rates by 50 or even 25-points. The Fed did reiterate its plans and intentions recently, and appears ready and willing to keep raising rates until inflation is under control. Unfortunately for the Fed, that could take an interest rate of 20% or even more, and the Fed is extremely unlikely to raise rates to Volcker era levels to combat inflation.

Now that the latest Fed meeting minutes are out, markets will now look forward to Friday’s release of the latest jobs data. The June non-farm payrolls figure is expected to come in at 250,000 jobs added. This would be significantly less than the 390,000 jobs added in May, yet still represented a very solid showing. The jobs data does have the potential to be market moving, however, as it could adjust rate expectations. A much stronger jobs figure could lend credibility to the notion of raising rates aggressively throughout the rest of the year. A weaker than expected figure, however, could alter such expectations and could give the Fed something to think about.

The bulls have been smashed this past week and are clearly on their heels currently. Despite today’s very modest gains, the bears remain in frim control on the daily chart and will look to produce a close below the $1700 level in the days ahead. The bulls need to not only stop the bleeding, but also need to take prices back above the $1800 level to attract more interest. In the meantime, bargain hunters may appear and look to scoop up gold at what may later be viewed as highly discounted prices. Although the long-term narrative for gold remains unchanged, the bulls may have to endure some pain ahead before finding some upside. The market is vulnerable to a sharp and rapid rally, however, as numerous bullish issues remain intact and as shorts get heavier and heavier.