Syria is the biggest story for the markets right now, and America's good cop/bad cop routine leaves gold searching for direction. In an environment like this, it is critical to keep an eye—or two—on the levels.
Gold was able to hold $1,401 through several tests Thursday, then traders pressed the market to an initial low of $1,392.50 early Friday morning. We found gold hugging our $1,395.20 level for most of the morning, before better-than expected final reading from the Michigan Consumer Confidence report dropped the market down to $1,391.80.
We have seen a "buy the rumor, sell the fact" mentality take over the gold market following Secretary of State John Kerry's dramatic speech Monday, and after a great deal of hustle-and-bustle, gold now finds itself back where it closed out last week.
(Read more: With Syria strike looming, you need to own gold)
Major support will come in at our $1,383 to $1,384.10 level, and a close below that will be bearish. In fact, it would likely signal a consolidation to the next major support level at $1,352, as we head into the all-important September Federal Open Market Committee meeting.
So how am I trading gold?
In this type of atmosphere, the levels are clearly working. We saw that on Tuesday, when a midday reversal at $1,413 provided a great selling. Now, after giving up its weekly gains, gold faces directional uncertainty heading into the long weekend, over which we could potentially see the U.S. strike Syria. For that reason, it is important to keep trades short, and to continue to use the levels.
On an intraday basis, $1,401 will serve as a level of resistance. Only a close above key resistance at $1,407 will help neutralize this early bearish activity. If we see new lows this session, we are still unlikely to reach as low as $1,383 to $1,384.10, because volume will taper off. If we get down there, however, traders can look to buy this level in the expectation of a consolidation back into the $1,390's before the close.