If the price of gold falls below $1,600 an ounce, it could go down by nearly 30 percent from peak and the dollar could strengthen by a similar percentage, Ron William, a technical strategist at MIG Bank, told CNBC on Monday.
Gold fell by more than 1 percent Monday, reversing a rise of over 3 percent in Friday's session, but is still trading above $1,800.
Last week, gold prices plunged on better-than-expected data on the US economy and widespread fears that the precious metal was overbought.
"The key level to keep in mind is $1,600 on the downside, which would confirm a much larger decline," William said.
A chart looking back to the price of gold since 1999 shows key cycle turning points for gold every year, he added.
"Of course we are in that risk zone at the moment and we have been for some time, going into September as well," William added.
The corrections of 1999, 2006 and 2008 saw the price dropping by around 28 percent. "This is something to keep in mind as kind of a potential risk scenario for gold if it were to break below $1,600," he said.
Large speculator positions in gold hit their peak one year ago and gold's potential decline, coupled with a retreat from risk appetite across the world, could send the US dollar soaring, according to Williams.
"In my opinion, the US dollar will be the surprise market that actually appreciates in value up to 30 percent over the next six months to 12 months," he said.
The dollar slipped against major currencies on Monday, with investors speculating that Federal Reserve Chairman Ben Bernanke will resort to more monetary easing despite a rise in core inflation.