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The gold market is trading slightly lower to kick off the new trading week as investors digest recent gains. Price action could potentially be fairly quiet early this week, as investors gear up for the Thanksgiving Holiday on Thursday. Markets will be closing early on Wednesday, and Friday will likely see many investors out and thus very low trading volumes.

The market has thus far remained bullish, and a key test of the psychologically important $1200 level recently would seemingly suggest that buyers are willing to step in on any dips at this point. This is especially important given the fact that the dollar is not far from recent 1.5 year highs. Numerous factors appear to be keeping any downside in gold limited, including accelerating inflation, stock volatility and geopolitics.

A major area of focus in the weeks and months ahead will likely be the Federal Reserve and its plans going forward. The Fed has stuck to its guns so far, gradually hiking rates as it looks to normalize monetary policy. The central bank has, however, come under increasing scrutiny from some market-watchers and even President Trump has made his opinions on the Fed’s plans very clear. It has been suggested that the Fed is acting too aggressively with its rate hikes, and some have argued that the central bank could very well push the economy into recession.

Bridgewater Associates founder Ray Dalio last week suggested that the Fed has already raised rates to the point of hurting asset prices, and that the central bank should focus on asset prices before economic activity when making further decisions. It is a challenging spot for the central bank to be sure, and it comes at a time when the Fed is clearly trying to maintain and demonstrate its independence.

Although all of the recent discussions about the Fed will likely not stop it from hiking rates once more next month, further stock market turmoil or geopolitical issues could potentially give the central bank reason to rethink its strategy for next year. The Fed currently has another three rate hikes penciled in for 2019, but a slowing global economy and other factors could keep a further rise in rates limited. Lower copper prices, tumbling crude oil, weaker housing data and increasing inflation could all point to a significant global slowdown that could drastically change current market dynamics.

If the Fed does in fact take a more dovish approach, the dollar could come under pressure and dollar-denominated assets could stand to benefit. The dollar may also begin to see fading upside as the effects of tax cuts and government spending begin to fizzle. A reversal in the currency could set the stage for a significant rally in gold. The yellow metal is already enjoying an improving technical posture and may be in a consolidation process before making a significant move. Given the current economic and geopolitical backdrop, such a move would likely take place to the upside. A significant upside breakout could potentially prove to be just the beginning of a protracted bull market that could coincide with stocks entering the next bear market.