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There has not been much to report on the gold market in recent weeks. The bears did cause prices to slide, however, and the market has been eyeing a test of the $1700 level for days now. Volatility within the market has seemingly collapsed in what could be a sign of a large move to come. That large move could be on the downside, given the current trend lower and other factors. Safe haven buyers have mostly stood by on the sidelines as risk appetite has returned to a degree.

Corporate earnings remain the center of attention for stock investors. Stock buyers have been able to rekindle prices on the daily chart, which are now in a short-term uptrend. Whether that trend continues remains highly questionable, however, as numerous bearish factors remain in play. Despite the trend higher for equities, however, the markets remain vulnerable to whims as summer trading doldrums take hold.

In what is perhaps the data highlight of the trading week, the European Central Bank is set to meet tomorrow and is expected to raise interest rates. The ECB could hike rates by .5% in the first hike done in some 11 years. Any move by the ECB tomorrow is likely to be followed up by the U.S. Federal Reserve next week. The Fed is highly likely to raise rates by another 75-basis points next week, with some even suggesting that a full, 100-point hike is possible. Not wanting to upset equity market investors, the Fed may err on the side of caution and stick with just a 75-point raise.

Worries over a Fed-induced recession remain robust and could be exasperated next week should the Fed raise by 75 or more points. The 2/10 year bond yields remain inverted today, in another worrisome sign of recession. Despite the risk of recession, the Fed has stated time and time again that it intends to get inflation under control and not allow it to become entrenched. Seeing this as the worse of two evils, the Fed may continue raising rates throughout the end of the year or beyond.

Yields have been on the rise again in recent action. The benchmark 10-Year Note is now fetching a yield of over 3.16%. The dollar is slightly stronger at midday today while the crude oil market dips. Outside markets may be pointing to some more difficult times ahead for gold. Despite that, however, the long-term bullish narrative for gold remains unchanged. Massive sovereign debt levels, weaker fiat currency values and other economic worries may all support gold in the months and years ahead. For the time being, the bulls may need to simply absorb more selling pressure until a fresh catalyst fuels a reversal. Once a reversal takes hold, the market could potentially skyrocket quickly as shorts are forced to cover and as FOMO sets in. The bulls will need to produce a close above the $1900 area before longs start getting excited and jumping in.