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The gold market had an interesting day, running sharply higher before seemingly running out of gas and falling back again. The market still finished the day session up modestly, but the day was a loser from a technical standpoint. After rising to well above the $1800 level in earlier action, the bulls found reason to quit on the day’s rally and prices closed below the technically key $1800 level.

The reason for the bulls running out of steam today seems to be clear. Commentary from Fed Chairman Jerome Powell seemed to deflate the rally and market optimism as he threw a bucket of ice cold water on the day’s price action and rally higher. In an online conference held by the South African Reserve Bank, Powell suggested that the central bank is still on track to begin cutting its monthly security purchases, or QE, before the end of the year. The Fed’s monthly purchases are now likely to end by mid-2022 as the Fed seeks to return policy to a degree of normality.

The gold bulls heard Powell’s commentary loud and clear as gold declined by $30 per ounce from the session highs in the aftermath of his comments. Powell did suggest, however, that inflation could possibly remain elevated through 2022 as supply bottlenecks are worked out. The working out of these bottlenecks could fuel a drop in inflationary pressures, with the annual rate declining back towards the central bank’s desired 2% target. Such a scenario seems to be more of a best case scenario, however, and inflation still has the potential to remain longer and/or creep even higher.

The Fed’s monetary policy has been a major factor

for gold in recent months. Although no changes have yet to be made, the anticipation of change has kept markets on the move with a degree of volatility sprinkled in here and there. Despite the Fed’s ongoing opinion that inflation is transitory in nature, the threat of rising prices could keep buyers going to gold and alternative asset classes such as crypto. Bitcoin, for example, made new all-time highs this week hitting over $67,000 per unit. The search for alternative assets could keep a bid going in both gold and Bitcoin for the time being. These assets could see drastically higher price levels in the months and years ahead if inflation pressures remain. Despite what Powell said today, the Fed could already be far behind the inflation curve and that could make higher prices here to stay.

The lack of a close above the $1800 level may give the bulls reason for pause early next week. If the bulls are able to mount a challenge of $1800 and take it out on a closing basis, the path could be set for a run towards resistance in the mid-1830s. If that area were breached on a closing basis to the upside, lookout as prices could potentially run sharply higher in short order, possibly even challenging the $1900 area within days or weeks.

A failure to close above $1800 could reignite bearish excitement, however, and could encourage more bulls to throw in the towel and more traders to play the short side of the market. In that case, a quick decline towards the $1700 level could potentially be seen.