Bulls beware: The gold bears smell blood

Andy Rouse | Image Bank | Getty Images

As gold's trend line fails, the bears smell blood. And now, $1,285 to $1,280 is in the cards.

Gold plummeted through $1,352 early in Thursday's session, and even found itself trading below its 50-day moving average at $1,331.80 for most of the day. Thursday's floor trading session closed at $1,330.60, but gold finished the electronic session with a bounce off of $1,320, which only served to set it up for a further washout overnight.

(Read more: Gold heads for worst week in 2 months on Syria, Fed)

With an overnight session high of $1,330.80, traders can see how Thursday's floor close and 50-day moving average came back into play as a strong resistance level. When gold touched that level overnight, it gave aggressive bears one last shot to sell.

Gold's low in early Friday trading was $1,304.60, which is below the $1,308.60 retracement-related support level. The momentum is undoubtedly to the downside, and we have consistently said that a close below $1,352 will put $1,300 into the cards within the next session or two.

(Read more: Gold price: 'Last hurrah' may be on its way)

Dennis Gartman: Why I got gold wrong

Gold will find psychological support at $1,300, but a close below $1308.30 will keep the immediate downward momentum intact. In order for gold to consolidate higher, we will need to see a close back above $1,330.60, and above the 50-day moving average at $1,332.60. A close back above $1,352 will be needed to signal a reversal of the downside momentum.

Right now, we are looking at two major downside targets in gold: $1,278.60, which is a major retracement level, and $1,271.80, which is the low that gold made on August 7th.

(Read more: Gartman admits he got gold and stocks all wrong)

Good luck out there — especially if you are a gold bull.

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

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