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The Price Where You Can Short Gold

Source: World Gold Council

If gold closes below $1,589.7, the bears will take control.

Gold saw yesterday's choppy trading turn one-directional last night, as the market traded back below $1,600 and to a low of $1595.1. After finding major support yesterday at the low of $1,588.4, just below previous lows but aligned with a retracement point, rumors continued to swirl out of Europe, allowing gold to bounce back. Yesterday's high was $1,606.8, and last night's was $1,605.1.

(Read More: Gold Eases Below $1,600; Cyprus Effect Fades)

Gold needed the fear trade to serve as a bullish catalyst, and with the equities holding higher lows yesterday before closing well and trading higher this morning, gold currently lacks that catalyst. Gold traded down $7 this morning heading into U.S. economic data, showing that traders are confident that the data will be strong and that the imminent fear in Cyprus has been more than relieved.

(Read More: Big Cypriot Bank Depositors Could Lose 40%: Minister)

Look for gold to hold major support at the $1,589.6 to $1,588.4 level, but note that a close below here will be very bearish. A close back into the $1,605 to $1,607.5 area is needed to spark momentum, but even a close back above $1,600 will satisfy the bull camp.

If you are considering shorting gold, sell it at $1,605 with a stop loss at $1,623 and a downside target down at $1,563. This trade risks $1,800 to make a potential $4,000.

Read on for 10 Things You Need to Know to Trade Futures

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