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The gold bulls are fighting their way back today as stocks get hammered once again. The Dow Jones Industrial Average is down over 500 points at mid-day and could make fresh lows as the afternoon gets rolling. Numerous issues are driving risk aversion today, with the ongoing war in Ukraine being front and center. The war is seemingly taking a dangerous turn for the worse as Western nations amp up their supply of arms to Ukraine and as Russian President Putin takes his anti-west rhetoric a notch higher. Hanging in the balance is the energy supply for Europe. Russia now appears ready to squeeze European nations’ natural gas and energy supplies in what could lead to a massive recession in the region.

Much of the market’s attention remains on China following its recent lockdowns of various major cities. Chinese officials today, however, have reiterated their intent to keep markets stable and vowed to introduce further stimulus measures meant to do so. China has been the center of much negative attention in recent weeks as the country closed some cities, including Beijing and Shanghai, and forced mandatory Covid testing on some residents. The lockdowns could put a dramatic damper on Chinese economic output. As the globe’s second-largest economy, the effects may be felt across the world and could even put the global economy into a contraction. Not to mention, the lockdowns will also put further strain in already-strained markets and supply chains, fueling even more inflation in the process.

Non-dollar currencies are catching a break today as Chinese officials looked to calm investors. That improved sentiment towards those currencies has the dollar declining, although whether the day’s declines are sustainable is another question entirely. The stronger dollar has likely been a major roadblock for higher gold, and should the currency continue to trend higher, the gold bulls may have a challenging time taking the metal above resistance. The bulls are seeing a degree of victory today, however, as the metal has firmly retaken the $1900 level. The $1950 area could be next if bullish momentum is sustained and that resistance level could provide the bulls with a good test.

The bears will initially look for a decline to produce a close below the $1900 level. The real test for the bears, however, may be at the $1850 region. A close below this level could set the stage for a fresh leg lower in price that may have many of the bulls throwing in the towel. This could lead to an avalanche of selling that could take significant time and effort to undo.

The bulls have thus far done a good job of buying any dips. There may not be any reason to believe that this will not remain the case in the months ahead, even if the Fed hikes rates aggressively. The gold bulls’ metal will likely be tested in May, however, as the Fed is likely to hike rates by 50 rather than 25-basis points.