NEW YORK ( TheStreet ) -- Gold prices tanked Wednesday breaking below key technical levels as a stronger U.S. dollar pounded the metal.

Gold for February delivery settled down $76.20 at $1,586.90 an ounce at the Comex division of the New York Mercantile Exchange. The gold price has traded as high as $1,645.80 and as low as $1,565.70 an ounce while the spot price was sinking $54, according to Kitco's gold index.

Silver prices lost $2.32 to close at $28.93 an ounce while the U.S. dollar index was rising 0.33% at $80.51.

The U.S. dollar gained against all currencies Wednesday and dragged down stocks and commodities. First, the Federal Reserve stood pat Tuesday in its last policy meeting of the year and refused to offer hints of further quantitative easing. The euro also slid hard against the dollar after a weak bond auction in Italy and Germany.

Italy's borrowing costs rose while Germany's fell but both countries saw weak demand for their debt. Markets also seem nervous about a possible ratings downgrade of France by Standard & Poor's. Mihir Dange, founder of Arbitrage, said the line in the sand for him would be $1,535 an ounce.

"If we break below that, you have to get short," Dange said.

Gold closed below its 200-day moving average of $1,618 an ounce. The 200-day moving average has been tested only seven times in the last three years and most investors and traders see it as a danger zone for gold.

There is "no quick rescue in sight for now," said George Gero, senior vice president at RBC Capital Markets. "These selloffs usually do not end right away."

Gero said gold's losses were accelerated as traders and fund managers had to trade the metal in for cash to cover losses elsewhere as bad headlines continued to mount. Stop losses -- in which traders are forced to sell gold at a certain level to protect profits -- were also activated.

David Banister, chief investment strategist at, was recommending that investors buy gold long into this selloff but with very tight stops at $1,600, meant that when gold broke below that level they most likely dumped those long positions, which could have further accelerated the sell-off.

"This is the place where the bulls need to make their stand," said Banister. "What should be happening right now is we are pulling back in the final leg down retesting the low $1,600s." The bulls failed Wednesday to deliver which "means a likely test of $1,530's is all for now," says Banister. "That said, gold is super super oversold so I suspect we bounce hard shortly."

"At the end of the day we've had a 34-month rally into August of this year and that's going to take a while to correct both in time and price. We've already corrected it in price and now we're just going through the time phase," he said.

Bespoke Investment Group wrote in a note Wednesday that gold's close below the 200-day moving average ended "the longest streak of consecutive closes above its 200-day moving average since at least 1975."

According to the firm, there have been 6 other periods where gold has stayed over its 200-day moving average and over the following week, month, three months, six months, and one year it broke that pattern, gold averaged positive returns two thirds of the time. " It turned out to be a pause that refreshed for gold," Bespoke said.

Gold mining stocks were in a world of hurt Wednesday. Kinross Gold ( KGC) was shedding 3.17% at $11.67 while Yamana Gold ( AUY) was down 4.38% at $14.20.

Other gold stocks, Agnico-Eagle ( AEM) and Eldorado Gold ( EGO) were trading lower at $38.84 and $14.69, respectively.

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-- Written by Alix Steel in New York.

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