DISCLAIMER: GoldInvestors.news is not a registered investment, legal or tax advisor or broker/dealer. All investment/financial opinions expressed by GoldInvestors.news are from the personal research and experience of the owner of the site and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors and misprints may occur.

Gold’s powerful rally has run into a serious technical warning just as stubborn inflation gives the United States dollar fresh momentum.

The following analysis reflects the views of a market professional rather than staff journalists.

The precious metal completed a three river evening star candlestick formation after the prior session left that possibility hanging over the chart.

The pattern emerged when a strong red candle finished the sequence, raising the risk that bullish momentum is beginning to crack.

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That signal is not yet a verified bearish reversal, however, because traders still need confirming price action.

A sustained decline in the next session would strengthen the warning, while a forceful rebound could leave the pattern looking more like a temporary pause after an extended advance.

Gold is simultaneously testing another major technical marker, the 200 day simple moving average.

Futures were trading only $3 below that pivotal line at the time of the original analysis, putting the market within striking distance of support that could determine the next major move.

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Gold recently reclaimed the 200 day average, which had been an encouraging development for bulls. If the level holds, it could contain the damage from the current retreat and provide a foundation for buyers seeking another run higher.

If that support fails decisively, the completed evening star will look considerably more threatening.

A break below the average could invite additional technical selling, particularly after a rally powerful enough to leave the market vulnerable to profit taking.

The immediate catalyst for the selloff came from July’s Personal Consumption Expenditures report.

Headline inflation proved hotter than Wall Street expected, reviving concerns that price pressures remain sticky despite the Federal Reserve’s aggressive campaign of monetary restraint.

The PCE price index increased 0.2% during July, surpassing the consensus forecast of 0.1%. On an annual basis, the index rose 3.7%, narrowly exceeding economists’ projection of 3.6% and giving dollar buyers another reason to step in.

Core PCE, which excludes food and energy, increased 0.2% from the previous month and 3.3% from one year earlier.

Both readings matched expectations, but the hotter headline number was enough to reinforce the market’s concern that inflation has not been fully defeated.

Consumer spending and personal income also came in slightly stronger than anticipated.

Meanwhile, separate data showed that United States gross domestic product expanded at a 1.5% annualized pace during the second quarter, matching the government’s initial estimate.

Durable goods orders delivered an even bigger surprise by climbing 1.1% in July. That increase was more than double the 0.5% gain analysts had forecast, adding to evidence that parts of the economy remain resilient despite elevated borrowing costs.

Curiously, the hotter inflation reading did little to reshape expectations for the Federal Reserve’s September decision.

The CME FedWatch tool placed the probability of another rate increase at roughly 36%, with that figure remaining largely unchanged after the report.

The more visible reaction occurred in currency markets, where the dollar strengthened notably.

Because gold and silver are priced in dollars, a stronger American currency makes the metals more expensive for overseas buyers and can weigh directly on demand.

Both metals moved lower as the dollar advanced, but silver showed slightly better relative strength than gold.

That divergence deserves attention because silver has historically amplified moves across the precious metals market, often rising faster during rallies and falling harder during selloffs.

Silver’s failure to lead decisively in either direction during recent sessions suggests the market’s internal signals are becoming less straightforward.

Traders should watch whether silver’s relative resilience continues or gives way to the sharper downside behavior that has often accompanied weakening metals cycles.

The next session will therefore center on two technical questions. Gold must prove that its 200 day average can function as support, while bears must produce enough follow through to confirm the evening star as a genuine near term reversal signal.

Until those questions are settled, the chart presents a tense contest between durable support and an increasingly ominous candlestick formation.

The author, a financial seminar speaker and coauthor of “Trading Applications Of Japanese Candlestick Charting,” plans to continue monitoring both signals through The Gold Forecast.

DISCLAIMER: GoldInvestors.news is not a registered investment, legal or tax advisor or broker/dealer. All investment/financial opinions expressed by GoldInvestors.news are from the personal research and experience of the owner of the site and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors and misprints may occur.