This Is Why 'Gold Bugs' Have the Edge

[Editor’s note: The following is a cross post by Jeff Kilburg, CEO and founder of KKM Financial and CNBC.com]:

Gold is gearing up to make a huge move one way or another. So which way will it go?

Buyers continue to test the crucial level of $1,422. In the event that $1,425 prints, shorts and those standing vigilant should briskly drive prices back above $1,450, sending gold on its way to test the multiyear low of $1,523. Not too long ago, gold sliced through that low like a hot knife through butter.

On the other hand, if the gold bulls (or the gold bugs) can't get $1,425 to print, the bears live a bit longer.

However, as Japan, the European Central Bank and pick-your-central-bank all continue to stimulate, the goal of inflation will be achieved. Of course, central bankers who have never traded the markets and don't truly understand momentum will most likely swing the pendulum too far. Inflation is not a matter of "if"—it is just "when."

In the short term, traders must stay focused on the data, as unemployment—or "unenjoyment"—this Friday will dictate the short-term path of gold. But it is critical to respect the technicals as we trade this volatile commodity.

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