Early in the European session, gold is trading at 1,975.36 above the 21 SMA and above the 200 EMA (1,944). Yesterday, gold rallied to hit a yearly high of around 1,984.74.

Gold took advantage of the slowdown in the US economy which directly affected Treasury yield bonds. Because it is highly correlated to gold, we saw a strong bullish move.

In the next few hours, gold is expected to reach 21 SMA located at 1,961, which could be seen as a strong technical rebound. Hence, the price could reach 1,975 and even reach the top of an uptrend channel of around 1,990.

The daily pivot point is located at 1,972. If gold falls below this level, we could expect a technical correction and the metal could reach 1,968 and 1,960.

On the other hand, gold is extremely overbought. So, if it reaches the 1,980 - 1,990 zone and fails to consolidate above this level, it could be seen as an opportunity to sell with targets at 1,961 and 1,955.

Our trading plan for the next few hours is to sell gold below 1,980. Since gold is showing signs of exhaustion, we expect a technical connection to occur which could prove our bearish strategy.