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Following consecutive days of losses, the gold market saw a sharp rebound today. Spot prices rose by some $12.90 in mid-afternoon trade. As inflation continues its ascent to the highest level in some four decades, investors are increasingly looking for hedges against rising prices. The primary attraction appears thus far to be gold.

As recently as last year, many expected Bitcoin and other cryptocurrencies to replace gold as a hedge against inflation. That has not happened, so far, however, as gold has outperformed Bitcoin recently by a wide margin. With so much volatility entering a wide variety of markets currently, the last thing investors may want or need is even more swings trying to hold a long position in cryptocurrency.

The Federal Reserve raised interest rates by 25-basis points yesterday in the first rate hike since 2018. The central bank suggested that several more hikes will be seen, with as many as seven taking place in 2022. Whether an increasingly aggressive Fed has enough ammunition is another question, and whether it will or will not use such ammunition is another as well. The path for higher gold appears to be set, however, regardless of how many times the Fed elects to tighten.

Inflation has been a problem for months now and appears to be here to stay. The latest reading on consumer prices showed a rise of 7.9% for February. That figure has some analysts thinking we will see inflation at double-digits this month. While a rise of 7.9% is certainly scary, a double-digit rise could really send fear into the marketplace. This fear could cause a further swelling of commodity prices across the board.

Outside markets are giving gold a hand today. Crude oil prices are sharply higher as they attempt to distance themselves from the $100 level on the upside. The dollar is sharply lower today, also providing fuel for gold bulls.

The gold bulls are still in control on the daily chart. That control has come under serious scrutiny in recent sessions, however, as gold tumbled immediately following its rise to fresh all-time highs. A top could have been reached in the near-term, and the bulls have their work cut out for them in order to make new all-time highs. The next target for the bulls on the upside is producing a close above the $2000 level. If that area is breached, it may encourage many more bulls to jump onto the bandwagon and could provide the gold market with the fuel needed to make a sustainable jump higher. The bears will look for a decline below $1900 on a closing basis and then the $1850 level.

It may take some time for the market to complete its back and fill trade on the chart. Price action between $1900 and $2000 in the meantime may be viewed as nothing but noise. With the ongoing war in Ukraine, the market could be susceptible to a rapid move higher or lower depending on what occurs in the weeks ahead.