After gold dropped to a 10-month low of $1,539.74 an ounce on Thursday, breaching a key technical level of $1,550, professional traders disagreed on how to trade it but came to a consensus on what's pushing it lower: U.S. dollar strength, thanks to money-printing by central banks around the world.
The dollar rose strongly against the Japanese yen on Thursday after the Bank of Japan announced aggressive measures to ease monetary policy, including a plan to double its holdings of bonds and stocks in two years. The yen fell as much as 2.9 percent versus the dollar, its largest one-day drop since Oct. 31, 2011 when it fell as much as 4.78 percent.
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"We're in this mode where any sort of dollar strength—doesn't depend on why it's dollar strength—causes people to sell out of their long-term bullish positions," said pro trader Jim Iuorio from the Chicago Mercantile Exchange. "We were looking for what happened to the Japanese yen to happen, so I do think there is a bounce coming up relatively quickly in the short end."
Iuorio remains long gold, adding that he plans to buy the June gold futures contract at $1,548 with a target of $1,575 and a stop of $1,537.
Meanwhile, the Bank of England decided not to pump fresh money into its stagnant economy but left open the possibility that further stimulus was on the way. The European Central Bank also commented on its weak economy and said it stood ready to cut rates, hitting the euro and helping the dollar.
(Read More: Central Bank Efforts May 'End in Tears': El-Erian)
"After the BoE and ECB meetings, the FX markets are clearly making the bet that the European central banks are either unwilling or unable to enter the currency wars," wrote Brian Kelly, founder of Shelter Harbor Capital, in an email to CNBC, adding that currencies have strengthened as equity markets weakened. "If indeed this is the bottom in gold, then currency wars will be the new paradigm under which the gold market rallies."
Kelly said he was stopped out of his gold trade at $1,550 an ounce but bought back in as the currency markets began to move on Thursday.
Dollar strength has put downward pressure on gold, said Jeff Kilburg of KKM Financial, but the declines also result from people being caught with long positions. Kilburg pointed out that gold had earlier found support at $1,622, but that has since become a level of resistance. Now that gold has fallen through the $1,550 level, he thinks it could drop to $1,523 an ounce. Still, he remains long the precious metal.
While dollar strength has negatively affected gold prices, said Rich Ilczyszyn of iiTrader, but the yellow metal has also been hurt by a lack of confidence among traders that the Federal Reserve will continue printing money.
The Fed's one power is to create money out of thin air, and it's using that power. In September, it launched a third round of quantitative easing, in which it has bought $40 billion of mortgage-backed securities per month—primarily in mortgage-backed bonds. Critics argue that QE will further devalue the dollar and ultimately create inflation, prompting many investors to buy gold as a hedge against it. Lately, though, traders have become skeptical about the program's future, Ilczyszyn said.
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"The low from May of last year sits at $1,526.7, and a further low from December of 2011 sits at $1,523.9. These two levels are truly the last lines in the sand outside of the psychological $1,500 price," wrote Ilczyszyn in a note to CNBC. "The trend is down, and the safe haven attributes of gold have diminished."
Pro trader Anthony Grisanti looks forward to Friday, when the Bureau of Labor Statistics releases its latest jobs data, a potential mover for gold. Strong employment numbers could cause gold to close at $1,520 and possibly $1,500 an ounce, he told CNBC.
"If the jobs number is perceived as bad and gold bounces, I am a seller," said Grisanti, founder of GRZ Energy. "No matter what jobs say, it's all about the dollar, and I think it remains strong."
Read on for 10 Things You Need to Know to Trade Futures
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