Forget about Syria, it’s time to short gold

Dario Pignatelli | Bloomberg | Getty Images

The picture has changed for gold. First of all, the U.S. appears to be considering military action in Syria. Second, traders are becoming more skeptical of the idea that tapering is imminent. And between Syria and the evolving thinking about the Fed, December gold futures have gotten pushed up to a 2½-month high of $1,423.

However, gold is now approaching significant technical resistance around $1,428. I believe the push higher in gold will begin to lose steam, and present the opportunity for a contrarian play. For one thing, it's hard for me to believe that the current administration will formulate an aggressive military plan. After all, the public certainly does not appear to have the appetite for it.

(Read more: Gold jumps on possible strike against Syria)

At current levels, gold is probably pricing too much pessimism, and I would be looking to sell December gold at $1,422, with a downside target of $1,387. A settle above $1,435 would convince me that I was wrong. If deterioration of economic data begins to accelerate, that could also throw a wrench into the short gold position, so it should be monitored closely. But remember, the question is not whether there are solid fundamental reasons to buy gold. Rather, the question is: Are those reasons being exaggerated at the moment?


Jim Iuorio is the managing director of TJM Institutional Services. Follow him on Twitter @JimIuorio.

Watch "Futures Now" Tuesdays and Thursdays at 1 p.m. EDT exclusively on FuturesNow.CNBC.com!

Like us on Facebook! Facebook.com/CNBCFuturesNow.

Follow us on Twitter! @CNBCFuturesNow.

Videos

  • Money manager makes bullish case out of DC gridlock

    Mayflowers Advisors’ Larry Glazer suggests the government shutdown is giving stocks a boost.

  • Futures Now: Crude falls under pressure

    Scott Nations of NationsShares and Brain Stutland of Equity Armor Investments discuss the uncertainty in crude oil with CNBC's Eric Chemi.

  • Futures Now FULL SHOW

    DC gridlock bullish for stocks, according to Mayflower Advisors' Larry Glazer. Gold's about to enter a 'golden cross' and that could point to a huge rally. Also, a giant winter storm is set to hit the east coast, and that's sent nat gas futures soaring. With CNBC's Eric Chemi and the Futures Now traders, Scott Nations and Brian Stutland, both from the CME.

Host Bio & Watch Now

Trader Bios