If history repeats itself, we could see another 11 percent of downside in gold.
The metal stretched itself to new lows early in the Thursday night session, reaching $1,179.40. However, we are starting to hit oversold conditions: Four out of the five major technical indicators that we follow are showing oversold.
Gold has recovered somewhat in early Friday trading, reaching a high of $1,211.40 before consolidating back below $1,200.
(Read More: Three Reasons Gold Will Go to $800: RBC Strategist)
We do expect this market to go lower, and have had a major downside target of $1,154 (for shorts) since $1,500 was violated.
Since 1970, Gold has been in roughly five bear markets, and the average decline has been 48 percent. If we suffer that decline this time, that would mean gold would drop to just under $1,000 per ounce.
Another important stat to remember is that the average gold bear market run has lasted 112 weeks, which would put us into October.
On Friday, a new high and a close back above $1,221—which is now major resistance—will signal an immediate-term consolidation higher. A further recovery above $1,254 will signal a short-term reversal.
However, a close above $1,275 is truly needed to show signs of a longer-term consolidation and a move back above $1,300.