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The gold market is steady in early afternoon trade Tuesday as the market appears to be awaiting some fresh inputs. The outside markets are playing a large role in price action this week. Weaker crude oil and rising treasury yields are both keeping any upside limited. Dollar weakness, however, may be giving the market a little bit of a boost.

The big data point of the trading week is set for release Thursday. The European Central Bank is expected to meet and raise interest rates for the first time in over a decade. The ECB is anticipated to raise interest rates by .5%. The U.S. Federal Reserve is widely expected to follow the ECB the week after, hiking rates by .75%. Although the rate hikes themselves are important, what may be even more important this time around is the central banks’ commentary.

It is no secret that inflation has taken the word by storm in recent months. What is unknown, however, is exactly how central banks plan to get it under control. While raising interest rates is one tool at the disposal of central banks, they may need more tools to stand a chance at winning this battle. Barring a Volcker-era style interest rate around the 20% level, central banks may need to find more ways to combat runaway inflation.

Not allowing inflation to become entrenched is key at this point. Should price pressures become entrenched, it could become much more difficult, if not impossible, for central banks to fulfill their mandates and keep prices stable. Fed Chairman Jerome Powell seems to understand this risk, and he has said the Fed will do whatever it takes to get prices under control again. This attitude has become a cause for concern among some, however, as the Fed could very well hike the nation into a recession. A Fed-induced recession has become a major topic of concern in recent weeks. Should the Fed continue to raise rates by 75 or even 100-basis points at a time, the economy could very well find itself slowing down to the point of contraction.

As the summer trading doldrums become increasingly boring for market participants, many markets such as gold may need a fresh catalyst to move higher or lower. The long-term bullish narrative has not changed at all since the metal began being sold off weeks ago. Despite the metal’s slide over the last several weeks, lower prices do represent a great long-term buying opportunity for patient investors. While it is unclear if the recent selling has now been exhausted, any move below the $1700 level is likely to be aggressively acquired by long-term bulls and may allow the market to find some bullish footing.

The $1700 and $1800 levels may be the technical keys in the weeks ahead. The bulls must produce a close above the $1800 level, while the bears will target a close below $1700 to attract additional selling pressure.