Comex gold futures closed solidly lower and nearer the session low Monday, on profit-taking pressure after prices hit a new all-time record high of $1,266.50, basis August futures, in early trading. A firming U.S. dollar index, and weakening crude oil and stock index futures prices in late trading did help to bring gold down from its early price gains. August Comex gold closed down $18.60 an ounce at $1,240.70. Spot gold was last quoted down $21.50 at $1,235.50.

While no serious near-term chart damage was inflicted in gold Monday, the bulls did fade in late trading. Good follow-through selling pressure on Tuesday would likely inflict some near-term chart damage. Thus, trading action Tuesday will be extra important for the gold market.

Recent price pullbacks in gold have been viewed by traders as bargain-hunting buying opportunities—and they have been correct in those views, so far.

News during the weekend that China said it would re-adjust the value of its currency, the yuan, did act to support most stock and commodity markets worldwide early on Monday. However, many markets did begin to back down from the early session highs as the China news was digested by traders. The move by China comes before a Group of 20 industrial nations meeting next week. China’s move to a more flexible yuan, however small it may be, is perceived by traders and investors worldwide as being positive for world economic growth and trade.

News reports over the weekend that Saudi Arabia is holding roughly twice the gold in its official reserves as previously thought appeared to have little impact on Monday’s price action.

The European Union’s ongoing financial problems are far from solved and the gold market should continue to see underlying buying support from that situation, including ideas that the European currencies could continue to lose value in the coming months. The Euro currency was firmer in early trading Monday but did back off its highs as the day wore on.

The London P.M. fixing was $1,254.50 compared to the previous fixing of $1,234.50.

Technically, August gold futures closed nearer the session low Monday after scoring a new all-time record high in early trading. Price action did score a bearish “outside day” down on the daily bar chart Monday, whereby the high is higher and low is lower than the previous day’s trading range, with a lower close. If there is good follow-through selling pressure on Tuesday, then a bearish “key reversal” down on the daily bar chart would be confirmed. That would be one early technical clue that a near-term market top is in place. The gold bulls still have the solid overall near-term technical advantage. There are, at present, still no solid early technical clues to suggest a market top is close at hand. Prices are in a 4.5-month-old uptrend on the daily bar chart. Bulls' next upside technical objective is to produce a close above solid chart resistance at Monday’s the all-time high of $1,266.50. Bears' next downside price objective is closing prices below technical support at the last "reaction low" on the daily bar chart, which is located at $1,216.20. First resistance is seen at $1,243.00 and then at $1,250.00. Support is seen at $1,240.00 and then at Monday's low of $1,231.00. Wyckoff's Market Rating: 7.5.

By Jim Wyckoff, contributing to Kitco News; jwyckoff@kitco.com