What Will Drive Gold Now: Trader

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The "Big Boys" are cutting their gold positions—so should you?

Hedge funds reduced their net long positions in gold by 4.1 percent, according to the Commodity Futures Trading Commission's weekly Commitments of Traders report. The continued banter about the tapering of quantitative easing has led investors to bet that interest rates and the dollar will both rise, reducing gold's appeal at these levels.

Gold continued to consolidate during early Monday trading, stalling out with a high of $1,391.40. Support comes in at $1,380 to $1,383, as the market has stayed just above here, putting in a low of $1,384.10.

(Read More: Peter Schiff Comes Out Swinging: Gold's Going 'to the Moon')

There has really been no catalyst to push this market up or down in recent trading days, and we have seen it consolidate in the near term. The dollar index has had a quiet day, but the slight uptick can explain the pressure on gold on Monday morning.

Traders will be looking closely toward the Federal Open Markets Committee meeting statement on Wednesday for help in determining the market's direction.

(Read More: Gold Marks Time as Investors Await Stimulus Outlook)

For many longs, the line in the sand remains at $1,370 to $1,372, and a close below this level will cause tremendous liquidation. Only a close back above $1,390 can provide the positive momentum this market will need to take a shot at trading back above $1,400.

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

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