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Pro: Here’s What Could Save Gold

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The Dollar Index has traded sharply lower over the last few trading days. In this scenario, we would normally expect gold to benefit from a corresponding bid. But the fact that gold has traded in relative calm and has not broken out to the upside leads me to believe that the negative forces affecting gold remain in control.

This thesis will be confirmed if the August futures contract trades down to $1,384. The immediate downside objective would then be $1,357. A subsequent trade above $1,403 would convince me that I was wrong.

So why might this trade not play out—in other words, what could reverse gold's weakness? Well, either the dollar slide needs to accelerate dramatically, or there needs to be a global event that cause immediate market panic. That could send people leaping into the arms of gold.

But in the absence of these occurrences, gold should continue its ongoing march to lower prices.

Jim Iuorio is the Managing Director of TJM Institutional Services. Follow him on Twitter: @JimIuorio

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