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.