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The gold market is off to a strong start as the new trading week gets underway. Spot gold is higher by over $11 per ounce in early afternoon action. The bulls are within striking distance of the $1800 level and could challenge the area sometime this week. Dollar weakness and declining yields are the primary reasons for gold’s strength today.

Investors will be focusing their attention this week on corporate earnings. The markets are in the middle of the summer doldrums, and lower trading volumes could fuel some volatility in the weeks ahead. Volumes may remain light until traders return from the Labor Day Holiday in early September.

The data stream will be watched carefully by markets over the next several weeks. There is no FOMC meeting in August. The group will meet again in September to determine any changes to monetary policy. The Fed has said it would rely on the data between now and then to determine if it will hike rates again. Following last week’s hot jobs data, the Fed may now not see any reason to pause or start easing but may stick to its plans of fighting inflation and raising rates aggressively to do so.

Any key data that misses the mark in the coming weeks may be viewed as something for the Fed to think about. Stronger-than-expected data may have the opposite effect, and could fuel the idea the Fed will raise rates by another 75 or more points. For the time being, markets are expecting another large rate hike from the Fed.

In recent commentary, however, Fed Chairman Jerome Powell seemingly suggested the Fed may step away from inflation fighting. He seemed to convey the idea that the Fed may take a wait-and-see approach to policy and could allow some time to pass by before hiking any further. Powell’s comments were before the recent non-farm payrolls data, however, and may no longer make much sense in light of the jobs data.

The debate over what the Fed may or may not do is likely to rage until the September FOMC meeting. The notion of an aggressively and hawkish Fed versus a more dovish Fed may keep gold on the move in the weeks ahead. Should the data stream show strength, it may keep a lid on any gold upside. Should the data stream soften, however, it could keep the gold bulls in business, pushing prices higher in the process.

Soft data may also fuel the current recession fears. Worries over a Fed-induced recession may increase if the data starts to show weakness. These concerns could fuel some safe haven buying in gold and could keep the market on the offensive. Should the economy enter a recession, it could give the Fed reason to pause and possibly even start easing interest rates. The idea of the Fed shifting its stance on policy may keep the gold bulls motivated. A close above the $1800 level may encourage more bulls to enter the market.