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The gold market is a tad higher in late afternoon trade Monday as the bulls look to catch their breath after the recent upside. The market has held last week’s gains, thus far, and a change in market dynamics could keep gold moving offensively in the weeks to come. The Federal Reserve recently signaled a possible slowing down in its aggressive interest rate hikes. That, combined with last week’s weaker-than-expected CPI report, could keep gold bulls moving in to buy on any dips from here.

The CPI report from last week registered a reading of 7.7% from the same period the year prior. Although a 7.7% print is still massively inflationary, the markets were probably expecting worse. Estimates had called for a rise of 8.2% and at this point, any weaker inflationary data is likely to be market-moving. The Fed has gone from moving far too slow to begin tightening policy, to rapidly raising rates aggressively and possibly fueling a recession. Now that the midterm elections have come and gone, the Fed may elect to take its foot off the gas pedal. The central bank cannot raise rates high enough and fast enough to get inflation to its desired target of 2% annualized, and it may simply begin to slowly give up the inflation battle to avoid a recession.

The recent gold breakout above the $1700 level coincides with a major pivot from the Federal Reserve and thus should not be taken lightly. If the Fed does begin to slow the pace of rate hikes, inflation is likely to remain anchored in place and could become a consistent problem. Long-term inflationary pressures could change the way people view money and the dollar, and could also send the prices of hard assets such as gold substantially higher.

The gold bulls are now in a prime position to take the market higher. The market is vulnerable to a pullback after last week’s gains, however, any declines in the metal could be aggressively bought as investors look to get longer and longer. The next major hurdle for gold is the $1800 level. If able to produce a close above this key chart level, the bulls will have undone much of the damage inflicted in gold in recent months and could set the stage for a run even higher. The market will need some cooperation, however, from its nemesis, the dollar. Both the dollar and treasury yields have seen steep declines since last week’s CPI data as expectations for the Fed and interest rates have changed. If the dollar keeps moving lower and if yields remain steady to lower, the gold bulls could have a field day taking the market higher over the next several weeks and months.

The Fed is still widely expected to raise rates next month by 50-basis points. Once 2023 gets underway, however, expectations for Fed hikes may become a lot less concrete. This could give the gold bulls a reason to buy and keep recent positive momentum going.