NEW YORK (TheStreet) -- After Monday's bounce in gold prices, traders are still using the $1,050 support level set by Goldman Sachs (GS) - Get Report in 2013 as a key level for their trading, Thomas Vitello, a partner at Aurun Options Strategies, said.
Vitello said the gold market has become quieter since Monday's bounce, although he noted there are plenty of short-sellers. The trader said he believes that the market "can go lower,'" but said he does not expecet a "real collapse" to happen in just one day.
He said that both the $1,050 support level set by Goldman Sachs in 2013 and the $1,030 price that gold hit two or three times after its 2008 rally from $700 are still important numbers for gold traders.
"If it breaks $1,000, all bets are off," Vitello said. 'You will have a lot of old longs who are underwater maybe taking another look, and they may bail."
HSBC (HSBC) - Get Report has lowered its gold-price forecasts for this year and next, citing a drift toward tightening by the Federal Reserve, inflation and a strong dollar. But Vitello said that's all priced in already and said he sees a "big overweight short position in the market in terms of the funds."
Vitello said that as gold prices drop below the support levels to new lows, some producers will be "in some pain," specifically in the United States because of the strong dollar. He said if the market does rally, that $1,030 -- which had been a support level -- could be a level of resistance.