The rally in December gold may not be over according to technical indicators, but it has certainly lost its glitter over the last couple of weeks.
After testing resistance on its week chart at $1,341.90, a price that marks the 67% retracement level of its previous downtrend from $1,391.90 through the low of $1,241.70, the contract has fallen back to test support between $1,294.60 and $1,276.90. These prices mark the 50% and 67% retracement levels of the initial rally.
Notice that weekly stochastics (bottom chart) did not move above the overbought level of 80% before the contract turned down. This would indicate that the December gold could find another round of buying interest in the near future, possibly enough to take it back to a test of its previous high of $1,347.50.
At that point stochastics will likely be in an overbought situation, setting the stage for the establishment of a secondary (intermediate-term) downtrend.