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The gold market is slightly higher in early action Wednesday as investors await the release of the latest FOMC meeting minutes this afternoon. While there is no guarantee that the minutes will move markets, past meeting minutes have done exactly that and today’s have the potential to do so as well. The Fed has stuck to its plans for higher interest rates for some time now, and with inflation still being problematic there is little reason to think the central bank would now decide to steer away from more rate increases.

The Fed’s previous rate hikes are having an impact. The effects of higher rates may be seen in recent inflation data, much of which has shown a slight easing of price pressures in recent months. While the Fed still has significant work to do, it does appear to be moving the needle in the right direction. A hawkish-sounding Fed today could set off some alarm bells while a more dovish-sounding Fed could fuel a rally in stocks and risk assets. The gold market could also benefit from a dovish Fed but it could also even find a way to rally if the Fed is more hawkish.

The gold bulls and bears are locked in a tight battle currently. The market is in a weak trend lower, giving the bears a slight advantage. The bulls need to take the metal back above the $1900 level and then challenge the $1950 area. The bears will look to take the market down to $1800 and if successful will then look for a challenge of the $1700 level. Until the bulls or the bears establish control of the market, more sideways price action may be seen.

In outside market action, the dollar is slightly lower today but may not stay that way if the Fed signals more rate hikes to come. The dollar has been a major obstacle for the gold bulls in recent months and any further strength in the dollar may keep the bulls from extending the rally. The higher the dollar goes, however, the harder it may eventually fall. If more counties look to dump dollars in the years ahead, the greenback could be hit by a tidal wave of selling that could take it sharply lower from recent levels. If such a scenario were to develop, the gold market could see a substantial upside as the dollar sees a significant downside.

Recent stronger-than-expected data may be soothing recession fears currently. It is not soothing to those concerned about higher interest rates, however, and the Fed may decide to keep rates higher for longer as it suggested previously. This theme is likely to be a major market catalyst for the months ahead and could set the stage for either a significant rally in the price of gold or a significant and sharp downturn in the price of the metal. Both camps are prepared for whichever materializes and it may now just be a game of waiting until it does.