The more I examine gold market technicals, the more suspicions I have about its rally potential. The recent weakness in spot gold prices has just pierced the sharply rising 20-day moving average for the first time since the April lows at $864.50. In the past, a sustained downside violation of the 20 DMA has represented a near-term sell signal that invariably runs prices towards a test of the 50 DMA thereafter.

Should such a scenario unfold this time as well, then we should expect lower prices into the $925-$920 area next. However, let's notice that the $925-$920 area also represents the coordinate of the major up trendline off of the October 2008 low, and if violated will argue for still more selling pressure that points to the $870-$850 target zone.

At that juncture, the Jan-June time period will resemble a massive top on gold prices. For the time being, my eyes are focused on the efficacy of the $925-$920 target support zone.