Now that gold's Fed pop has subsided, look for market to retest recent lows.
Everyone will remember last week as the one in which the Federal Reserve failed to taper asset purchases. Gold shot up as a result. So you might be surprised to learn that from the electronic open on Sept. 15 to the electronic close on Friday, gold actually traded lower on the week.
(Read more: Gold bulls undeterred as stimulus-led rally fades)
In a way, this is exactly as it should be. Because on first blush, the Fed's decision not begin its exit from quantitative easing appears bullish for gold. But the reality is that this does not change the scope nine, 12, or 18 months out, when the chances of hawkish Fed action still appear highly likely. And that's what you see reflected in the gold market now.
(Read more: Why Bernanke may have ended gold's bear market)
Gold initially rallied after the Fed announcement on Wednesday, and extended its highs into Thursday, when it reached $1,375.40 in the December futures. With major resistance above at $1,379 and $1,383 to $1,384.10, gold never even had the strength to reach major resistance levels. And once gold moved below the key $1,352 level on Friday, the party was over. We believe that much of the initial reaction to the Fed was short-covering and stops getting hit at the $1,325 level, rather than fresh buying.