Gold is moving higher after the latest U.S. Fed announcement. Investors were not very happy with Mrs. Yellen's speech, which is understandable. When we review where the gold market stands, we basically see a fight between bullish and bearish forces. Let us explain.

One of the indicators, according to our methodology, is the futures market structure, particularly the short positions of commercial traders. In order to understand the underlying dynamics, we use an analogy: the faster commercial net short positions increase, the more stopping power they create to cap a rally. In that context, one can clearly see in the lower pane of the next chart how commercial traders are capping rallies as every time gold's price nears resistance (since 2012). Readers can do the exercise by comparing the peaks since 2013 on the chart above, and see how that coincides with peaks in net short positions of commercial traders on the chart below (blue bars, lower pane).

Gold - Fight Between Bulls And Bears Chart 1

Today's futures positions are still relatively low, and the rate of change is low as well, as indicated with the green rectangle. We interpret this as 'there is sufficient upside potential' on the short and medium term.

Furthermore, we saw in recent months a strikingly positive correlation between the U.S. dollar and the price of gold. Since August of 2014, the dollar has put enormous pressure on markets, and, particularly, crude oil, after a monster rally of 30% in less than a year. That has only happened before in 1997, and we know from that time period that pressure eased after the dollar's first leg up. If history is any guide, we will see a continuation of the bull market in the U.S. dollar but with less pressure on other segments on the market. Is the recent positive correlation between gold and the dollar a first confirmation of that trend?

Gold - Fight Between Bulls And Bears Chart 2

A strong dollar, however, is deflationary (or disinflationary at best). And this is a key concern for precious metals. Low inflation expectations are THE key driver for precious metals. Our point is clear when looking at TIPS, the inflation expectations indicator, which is not looking very constructive.

Gold - Fight Between Bulls And Bears Chart 3

All in all, we believe there is a fair chance that gold could do well, for sure in the short and medium term. However, there are bearish forces at work as well. We have said before that 2016 will be a decision year, and we stick to our point.