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Wednesday morning is seeing more profit-taking in the gold market. The metal is already off the lows of the session, however, down less than $6 per ounce in mid-morning action. The yellow metal may be taking some heat today as the key outside markets have assumed a bearish posture. Crude oil is weaker today while the Dollar Index is stronger. Despite these bearish markets, however, some bulls have already stepped in to buy the dip today, and do not be surprised if gold ends the session in the green rather than the red.

The gold market may now be in a holding pattern of sorts until the next FOMC meeting next week. The metal has reacted to the Fed’s commentary in a dovish manner, but the central bank’s commentary can and does change quite frequently. Whether the gold bulls can continue the recent rally may very well depend on what the Fed has to say following its upcoming meeting. It is widely expected that the Fed will raise rates again, although by only 25 basis points this time around. Markets are far more interested in what the Fed has to say about further hikes as 2023 gets rolling. If the Fed strikes a dovish tone in its commentary and outlook, the gold bulls may see that as a green light to drive prices higher. If the Fed sounds more hawkish, however, the bulls could see that as a sign to bail and the market could be sold off heavily.

The Fed has already alluded to rates having to remain higher for longer. Just how high remains a big question, as well as for just how long. Some analysts have already suggested the Fed could look to start easing in the second half of the year. Others feel that a pivot by the Fed won’t be seen until sometime in 2024. Either way, markets will be looking forward to the day the Fed signals a reversal. That reversal could also be a primary factor for gold reaching new all-time highs. The market is already within striking distance of previous all-time highs, and a significant catalyst could send the metal back to those levels or beyond.

In addition to the Fed and its plans for rates this year, gold may also be affected by the debt ceiling. The ceiling was reached again last week, and the Treasury Department has taken some extraordinary measures to allow the country to keep paying its bills. Once those measures expire, however, there could potentially be big trouble if politicians are unable to reach a deal in time. With the U.S. debt now standing over $31 trillion, many wonder how the nation might even attempt to pay down its debt or if the debt is already unpayable. Whether the debt ceiling is extended or not, the issue of massive debt may keep buyers in the gold market as concerns over an eventual currency debasement or debt default mount.