Gold rally proves short-lived as it falls $40

Today’s outside reversal lower in gold prices rekindles some worries on the chart.

Gold has looked to be forming a head-and-shoulders top over the past two months in a move that would target $2150. However yesterday the bulls made a move and tried to take out the late-May highs. That failed through and today the sellers returned with a vengeance, knocking it lower by $40 to $2318.

While the pattern isn’t exactly textbook, it is a head-and-shoulders top and it comes after some data showing that the US service sector isn’t slowing. In fact, the S&P Global services PMI rose to a 26-month high.

That could keep the Fed from cutting rates at all this year and lead to aggressive profit taking in gold.

This article was written by Adam Button at www.forexlive.com.