Gold is poised to break below $1,200 on Wednesday. As we previously predicted on CNBC's "Futures Now" blog, gold stayed in check until options expiration, but after Friday's expiration, the metal resumed its selloff.
(Read More: Gold Prices Sink to Lowest Level Since August 2010)
On Monday evening, gold put in new lows, reaching below $1,250. And on Wednesday morning, we now see it just above our $1,221 support target, with a $1223.20 low. This is a fast market, and we have already seeing a bounce off of the lows—but we anticipate this to be short-lived. Our major downside target has always been and still remains $1,154.
We see resistance coming in against the first hard low on Tuesday night at $1,242.60. Aggressive bears who are looking to add to shorts can sell against this level, and look to put stops above the next resistance level at $1,254.30. (The market failed twice at $1,254, in a pattern known as a "double top," which marks resistance.)
A close below gold's first resistance will be important to maintain immediate downside momentum, but only a close back above the initial $1,268.70 low can neutralize this selloff. On the upside, a move back above $1,275 could signal a short-term reversal.