The game change in gold

Ralf Hettler | E+ | Getty Images

How quickly things change. Gold's critical $1,300 level, which once served as resistance, is now support.

Although it matched the previous session's $1,348.70 high, gold failed to make a new high and stalled out against our $1,351.40 resistance level very early in Wednesday's session. Thursday is August option expiration, and as clocks tick, we are seeing a similar pattern to one we saw in April. Back then, when gold broke down through $1,500 and reached down to $1,323 before bouncing, many put option sellers found themselves with serious losses, and they were forced to either cover puts or buy futures to close the option position. This caused a quick bounce, and strong price action in gold.

(Read more: Why Detroit is good for gold: Ron Paul)

We believe we have seen a lot of short-covering in the last week, and a bounce that may have come a lot sooner if not for Federal Reserve Chairman Ben Bernanke's road show over the last two weeks. Yes, gold closed back above our $1,323-to-$1,326.50 band this week, neutralizing the bear market. We have also defined the new range as $1,300 to $1,370. On Wednesday, however, the $1,323 to $1,326.50 band provided little support after its second test in two days; $1,338 provided support through the night, but became resistance on Wednesday morning before gold fell further.

As we always say, when major resistance is broken, it becomes support (and vice versa). Right now, $1,323 to $1,326.5 is resistance.

With a low of $1,308.40 in the early Thursday session, traders will be closely watching the close. Failure to maintain $1,300 will prove the recent rally false.

—Rich Ilczyszyn is founder and CEO of iiTrader. Follow him on Twitter @iiTrader.

Watch "Futures Now" Tuesdays and Thursdays at 1 p.m. EDT exclusively on FuturesNow.CNBC.com!

Like us on Facebook! Facebook.com/CNBCFuturesNow.

Follow us on Twitter! @CNBCFuturesNow.