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The gold bulls may be looking for a rebound in the week ahead after the metal saw some sharp selling last week. Thursday’s action saw the brunt of the selling pressure as the metal declined by 1.5%. Although a host of factors could be at work, the steep drop was most likely fueled by increasing risk appetite and a stronger dollar index.

It is looking increasingly likely that ongoing U.S./China trade negotiations are going to bear fruit. Although no specific date has yet been set for President Trump and Xi Jinping to sit down and formalize an agreement, recent talks have reportedly been very constructive and at this point it may simply be an issue of finalizing the details.

Reports of an agreement getting closer to fruition and some positive data coming out of the world’s second-largest economy have boosted stocks in recent days and fueled appetite for risk. Recent data released on trade and construction activity, among other reports, sent equities higher and seemingly provided global markets with a collective sigh of relief. Although China has certainly seen some bumps in the road, its economy may be stabilizing and a formal agreement on trade with the U.S. may send global markets even higher while boosting overall economic output.

With the U.S. Fed on hold and potentially even being forced to cut rates sometime this year, any signs of strength out of China may drive the dollar lower against key rivals. Recent dollar strength has likely played a major role in the lack of upside follow-through seen in gold in recent months and a significant breakdown in the currency could potentially pave the way for a more sustainable rally higher.

Although a weaker dollar could be bullish for gold, stock markets may hold the key to a significant upside breakout. Gold has already shown that it can move higher despite a stronger dollar, but yield-hungry investors have shown a strong tendency to turn to stocks as markets have recovered since the first of the year. Recent market action has put the benchmark S&P 500 within striking distance of previous all-time highs, and given the buying seen in recent days the market looks intent on seeing a 3000 print in the index.

As stocks have approached those previous highs, the gold market has simply tried to “hang in there.” Recent dips into the $1280-$1290 region have been bought and the area seems to have a great deal of willing buyers. With or without a weaker dollar, however, the gold market may need to see a breakdown in stocks before moving significantly higher.

The week ahead will have markets watching for further U.S./China trade developments and more positivity out of the Chinese economy. Further signs of stabilization in China may send stocks higher yet but may weigh on the dollar at the same time. The major test, however, will occur once the initial euphoria has worn off. In classic “buy the rumor sell the fact” fashion, stocks may simply run out of gas once a trade deal is done and as things are looking better in China. Such market exhaustion could coincide with a major, long-term top in equity markets despite an increasingly dovish Fed.

Such a scenario could potentially set the stage for a sharp rally higher in gold and alternative asset classes that could propel the metal into the next phase of a cyclical bull market.