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The gold market is lower on Wednesday as investors monitor the midterm elections results from Tuesday. Although some races are still too close to call,  it appears that the red wave many thought could be calling has fallen far short of expectations. Many Republican candidates have flopped, leading many to wonder how the party may fare in the 2024 presidential election. Investors are not only dealing with the election results but are also still watching the crypto space closely. The recent drama surrounding FTX could prove to be a contagion. That contagion could very well spread and could pressure assets already under significant pressure.

The crypto crunch from Tuesday is just like other markets. When a crisis of confidence hits, investors all running for the exit signs at the same time can lead to a liquidity crunch. The cryptocurrencies are still quite shaky Wednesday, and any further declines in the space could lead to more safe haven buying in gold and silver. While the crypto space will be watched closely, investors may now be turning their attention to tomorrow’s release of the latest CPI data.

CPI is expected to come in at 7.9% on Thursday. Although still a very high number, the expectations are a bit lower than the 8.2% print seen for September. If the report comes out as expected, it may not have much of a market influence. A large miss or beat, however, could change investor mindsets and could possibly lead to a large sell-off or rally in stocks and gold. A big beat on the data may lead to increasing bets on the Fed continuing to raise rates aggressively into 2023. A large miss, on the other hand, could bolster projections for the Fed to slow down the pace of rate hikes or to even reverse course and begin easing rates again.

Now that the metal has retaken the $1700 level, it will attempt to hold above it. The upside breakout seen on Tuesday may be sustainable if it is followed through on by additional buying. If the market tests the $1700 level in the next few days and fails, however, the metal may find itself right back to where it was: in no man’s land. The metal could then  potentially spend even more time trading sideways, with little to no conviction on either side to sustain a move higher or lower. The bulls have an edge for the time being, however, and will need to work to maintain that edge. The next several sessions could be important for gold as it looks to hang onto some of its recent bullishness. The first big test comes on Thursday in the form of the CPI data.

Gold prices hit a four-week high today. Despite this, the bears are still in control on the daily chart. Now that the bulls have fueled an upside breakout above the $1700 level, the next major upside target will be $1800. The bears will work to push prices back below the $1700 level, with a target of the November lows around $1618.