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Things are not always what they seem…The old saying could make a great deal of sense against the current economic and geopolitical backdrop. With the conclusion of the Mueller report now in the rear-view mirror, investors will again focus their attention on the bigger picture. They may not, however, like what they see.

The Federal Reserve and the path of monetary policy will be a primary area of focus in the months ahead. After the latest Fed meeting, markets are not expecting any further hikes from the Fed this year. Some Fed officials and analysts have, however, suggested that more hikes may still be appropriate. Although the economy remains strong, some cracks have begun to emerge that could potentially spell trouble for the globe’s largest economic engine.

Not only have rate hike expectations pretty much been thrown out the window, but there seems to be increasing talk of the Fed even starting to ease again. That is where things started to look far more interesting late last week. On Friday, White House Economic Advisor Larry Kudlow suggested that the Fed should cut rates by 50 bps “immediately.” Kudlow’s comments should not come as a surprise, as President Trump has been highly critical of the central bank and its rate hikes for some time. It has fueled some speculation, however, that perhaps the economy is not as solid as some think. Looser monetary policy could also potentially be used as a hedge of sorts if a trade agreement with China is not reached in the weeks or months ahead.

Despite the Fed’s increasingly dovish stance, the dollar index has continued on the offensive and has likely been a major factor in gold’s recent pullback. Several factors may continue to keep the greenback moving higher, as investors seek out its perceived safety and stability. Concerns over U.S./China trade talks, the uncertainty surrounding Brexit and even a change in tone from the ECB may all keep a bid in the U.S. currency.

The dollar is back at a multi-month high and could potentially be on the verge of an upside breakout. How much room the currency may have to run is unclear but further gains above recent highs may be limited. A resolution to any of the above issues could put some significant downward pressure on the currency and force a change in trend. A weaker dollar could give the gold bulls a breath of fresh air and fuel higher prices. If U.S./ China talks break down, or if a no-deal Brexit is set to take place, the flight to safety could be significant enough to propel gold higher despite a stronger dollar.

Markets will be watching the data stream closely in the weeks and months ahead as concerns over a major global slowdown mount. Key data points such as housing and manufacturing have shown measurable weakness in recent months, and the latest reading on consumer spending and inflation did nothing to alleviate those fears.

The significant economic slowdown along with benign inflation may allow the Fed, and even other central banks, to ease again if necessary. An extension of ultra-low rate policies could keep a floor under the gold market and other dollar-denominated assets.

In the meantime, gold has fallen back into its previous trading range and will likely find significant buying interest on any dips towards the range-bottom around the $1280 area. The gold bulls may simply be in a holding pattern until the next major buying catalyst comes along.