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The gold market is lower on Friday as a stronger dollar takes a toll. The solid rebound for the dollar this week is having a bearish effect on the metal, as slow, summertime trading also weighs. With no economic data set for release today, the market could simply drift the rest of the session as lower trading volumes do not help.

Despite today’s quiet market action, the gold bulls do have several issues behind them. The markets are still paying close attention to ongoing developments on the war in Ukraine. As U.S./Russian relations deteriorate further, concerns may increase about the possibility of an armed conflict involving the United States. The threat of an armed conflict is likely to keep gold interest elevated and may send buyers rushing into the market on any significant dips. The metal has held the $1,900 level thus far, and any tests of that area may be met with aggressive buying.

The war in Ukraine and the possibility of Russian conflict with the U.S. is not the only geopolitical issue to worry about right now. Talk has been escalating about the possibility of China invading Taiwan. A Chinese invasion of the island would almost certainly invite a U.S. response. If the U.S. and China were to square off, it would likely become World War III as U.S. allies and Chinese allies would also likely get involved. The balance of global power could even see a shift if such an event were to take place, and a U.S. loss in the fight could signal the end of an era for the nation.

An increasing number of nations are already moving away from the dollar. The currency is likely to lose its standing as the global reserve currency of choice in the years ahead. Once it does, the dollar could even become nearly worthless. As a massive supply of overseas dollars comes back stateside, the giant supply increase could erode the value sharply. Some nations have recently begun implementing a currency backed by gold. This trend could be set to continue in the years ahead, especially given the current state of sovereign debt.

For the time being, the gold bulls will attempt to keep the market as close to $2,000 as possible. The bulls currently have a slight advantage on the daily chart with an uptrend in place. The weak trend higher must see some follow-through in the weeks ahead, however, it will become vulnerable to a large sell-off. A challenge of and close above the $2,000 will need to take place to keep the bulls in business as summer begins to wind down next month. A failure by the bulls to overtake the $2,000 in the weeks ahead could set the stage for a bearish run lower and a possible test of $1,900.