What gold bears are hoping for

Steven Puetzer | Getty Images

Even after the recent selloff, gold volatility remains lower than some might have expected. But there's a good reason why.

Gold started the Wednesday session lower, after ending Tuesday on its lows. During the Tuesday session, gold initially hit a low of $1,278.10, finding our next support level dead-on. But later trading became choppy, with gold hitting $1,272.50 before recovering, and then again swinging to new lows at $1,271.80.

(Read more: Bullion's speculative trade near its end: World Gold Council)

After two Fed presidents hinted on Tuesday that they believe we will see tapering before the end of the year, and possibly as early as September, gold's path of least resistance has been to the downside.

But traders are taking note of the fact that these comments are not causing a quick liquidating of the metal. This is because the big money managers have to look nine, 12 and 18 months out, and do not trade on a daily basis. These managers forecast tapering at the end of 2013 months ago.

(Read more: Gold orbits 3-week lows as market ponders Fed's next move)

On top of that, the truth is that it doesn't make a huge difference if the taper comes at the end of 2013 or at the beginning of 2014. The bottom line is that it is coming.

Wednesday's early high was $1,284; Tuesday's first support will now be first resistance, and only a close back above there will signal a slight rejection to the downside. The next major downside target is the retracement level at $1,265.90. But the key "pivot" band is $1,275 to $1,278. A close below there is needed to provide bearish momentum.

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

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