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Mark My Words: Gold Will Bounce

Tuesday, 9 Jul 2013 | 2:04 PM ET
Merrill Lynch's Gold Call
Tuesday, 9 Jul 2013 | 1:10 PM ET
Gold attempts a comeback after recouping last week's losses. With Mary Ann Bartels of Merrill Lynch, as well as CNBC's Josh Lipton and the Futures Now traders.

Looking for a fundamental reason to own gold? Keep looking.

Simply put, the fundamentals do not look good for the metal. Inflation is tame, interest rates have risen and stocks remain buoyant. Gold has lost more than 30 percent of its value over the last nine months, which has washed out many of the weaker hands.

(Read More: Gold's Jobs Nightmare)

However, no market moves in a straight line forever, and gold has fallen to a level from which it could enjoy a corrective move. If August gold futures were to trade down to $1,257 today or tomorrow, that would indicate to me that a bounce is imminent. For this trade, I would target a move up to $1,285, and a subsequent trade to $1,237 would convince me that my thesis is wrong and that gold has further downside.

(Read More: Three Reasons Commodities Look Horrible: Roubini Strategist)

Many times, an initial push is required to get the ball rolling, and that could come in the form of another negative headline from Egypt or some backtracking from Chairman Bernanke tomorrow. Nonetheless, one thing I'm sure of is that there are many short positions that have jumped along for this dramatic decline and at any moment some big players could decide to cover. When this short-covering begins, the move to the upside could be quite sharp.

Jim Iuorio is the managing director of TJM Institutional Services. Follow him on Twitter @JimIuorio.

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