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The gold bulls appear to be taking a bit of a break. In the last two sessions, prices have declined from well over the $1800 level to a current price of around $1738. The bears came out aggressive again today, following up on recent declines. The bears took prices right through support at the $1750 level and now may be poised for a test of $1700 in the days ahead.

The release of the Fed meeting minutes was likely the biggest economic data point for the day. The minutes did not contain any surprises, however, as the central bank appears to be remaining focused on inflation rather than growth. The minutes showed Fed officials agreeing that inflation risks are to the upside, and cited several of those risks that include supply-chain bottlenecks and rising commodity prices. The Fed appears ready and willing to hike rates by another 75-basis points at its next policy meeting.

The notion of the Fed doing another large rate hike and keeping up with its plans to battle inflation may have some worrying over a Fed-induced recession. Should the Fed continue to hike rates aggressively, it could, in fact, slow the economy down enough to put it into recession. Some have argued, however, that the economy is plenty strong and can tolerate further rate hikes without a problem. Of course, time will tell. The concern over a recession may keep market participants on edge for the months ahead, and may lead to further volatility and selling across risk assets.

The Fed could come under increasing pressure as it looks to normalize policy. Should a recession hit, the central bank could see significant pressure to halt its rate increases or to even reverse course and start easing again.

For the time being, the Fed seems willing to stay the course and continue tightening policy. The Fed could change its mind, however, and do so quickly if public and/or political pressures warrant it. The Fed seemingly wants to remain on the hawkish side of the ledger for now, and to communicate its intentions as clearly as possible.

Now that the bears have taken out the $1800 level on a closing basis, the path of least resistance is lower. Having taken out the $1750 area today, the bears may now target a test of the $1700 level in the coming days. Should this area fail to hold, the metal could find itself headed sharply lower, and doing so quickly. The bulls have a lot of work to do. They must first produce a close above the $1800 level and then the $1900 level to attract any momentum. With a close above these levels, amny rallies could prove to be limited in nature and result in large sell-offs. With volatility likely to expand, however, gold could find some buyers and bargain hunters if it dips any further. More selling in stocks and risk assets could also see capital finding its way into the gold market.