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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.