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The gold market is seeing some moderate selling pressure Thursday as spot prices are down nearly $17 per ounce in early afternoon action. In addition to rising yields and a stronger dollar today, the gold market is also likely being sold off on some better-then-expected economic data released this morning that falls firmly into the hawkish policy camp.

The biggest data point of the day was the advance estimate of fourth-quarter GDP. The GDP reading was up by 2.9%, slightly higher than market expectations for a rise of 2.8% year-over-year. The figure was a bit softer compared to Q3 GDP data, which saw a rise of 3.2%. Other data released Thursday was also upbeat and could increase expectations for the Fed to remain more on the aggressive side when it comes to policy. The next FOMC meeting is taking place next week, and current expectations are for the central bank to raise rates again, although by 25 points this time around. A 25 point hike will show the Fed’s willingness to keep taking rates higher, but also shows their acknowledgement of what raising too rapidly could do to the economy. Concerns over a recession this year have already increased substantially and could rise further if the Fed keeps trying to put on the brakes.

The threat of a recession in 2023 may be the primary driver for gold in the year ahead. The Fed knows it has to walk a fine line, and the slightest misstep by the central bank could allow inflation to run rampant for longer or could send the economy straight into a major recession. Fears over a recession may keep the Fed a bit more flexible when it comes to raising rates, and the Fed may look to take longer to get the terminal rate to the desired level. Of course, further data pointing to a slowdown in inflation could give the Fed reason to pause. While a pause by the Fed may be a distinct possibility, a reversal by the Fed seems unlikely at this point. Yes, inflationary data has come down a bit. Inflation still remains far too high, however, for the Fed to start easing rates in good conscience. Sometime during the second half of the year, the Fed could potentially signal towards a timeline for easing. Easing is unlikely to begin anytime this year, however, and would most likely not be seen until early 2024 at the soonest.

The path of least resistance in gold may remain higher as long as easing is expected at some point down the road. The bulls have been able to maintain the market above $1900 for several days now, and the longer they do so the tougher any downside may become for the bears. The bears will first look to produce a close below the $1900 level while the bulls will target a close above $1950.