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Traders Agree: Gold Will Keep Dropping

Wednesday was a tough day for gold as it dropped below $1,400 for first time in nearly a month. But traders foresee more pain for the precious metal.

"Once we broke that support at $1,418, you have to look at that as resistance," said Anthony Grisanti of GRZ Energy. "If we settle below $1,400, we're going to take a shot at $1,300."

It ultimately comes down to the dollar, according to iiTrader CEO Rich Ilczyszyn. "The dollar is the tallest midget in the room right now," he said on "Fast Money: Halftime Report." Because the currency has been strong relative to others, gold has suffered from the lack of inflation, the trader said.

"For years, gold was a great hedge against purchase power, and now that comes into check," Ilczyszyn said. "Gold will continue to go down until the price is attractive against stocks," he wrote on CNBC.com.

Gold, stocks, and the dollar are more intertwined that it initially appears, according to George Gero, RBC precious metals strategist. In a Wednesday morning note, he wrote that "the recent decline in gold prices is a result mainly of strong stocks using up dollars, as international investors participating in the 14 percent up move this year in stocks have to pay for them with dollars."

That would mean that the rally in U.S. equities makes gold less attractive for two reasons: One, it has strengthened the dollar; two, it has made gold a major relative underperformer.

How far can gold drop?

"If we get through the $1,300, gold can hit $1,100," Grisanti said.

— By CNBC's Alex Rosenberg. Follow him on Twitter @LilRosenberg

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