Gold prices are extremely volatile around $1700. FED Chair Jerome Powell said the central bank needed to “act soon” and “forthrightly” to manage inflation, raising the probability of a 75 basis point raise when it meets on September 21-22. The European Central Bank is likewise expected to raise rates by the same level in October.

Money market traders believe the FED will raise rates by 75 basis points at its meeting this month. Over the previous several decades, gold prices have tended to outperform in the early stages of a rising cycle, but have shown persistent underperformance when markets predict the real level of the Fed funds rate to rise above the neutral rate.

As long as we stay over $1680, there is a chance that the market may come around, at least for the time being. All else being equal, gold will likely continue to attract a lot of attention, but it does not guarantee that we will immediately rally and continue to soar straight up in the air. I believe this market will remain volatile, but falls may provide purchasing chances. This will be especially true if interest rates in the United States begin to fall.

If we were to break down below the $1680 level, then it’s likely that the market could break down rather significantly, perhaps reaching down to the $1500 level. The $1500 level is an area that would attract a lot of attention, but if we break down below there then it could open up the floodgates. I don’t necessarily think that’s going to be the case, but ultimately this is a market that will eventually find its footing, but rates are working against it right now.