XAU/USD May Rise as Retail Traders Become Bearish

Gold, Retail Trader Positioning, Technical Analysis – IGCS Update

• Gold prices extend recent push higher to trendline
• Retail traders are becoming slowly more bearish
• Will XAU/USD push higher in the coming sessions?

Gold prices have been aiming higher in recent weeks. In response retail traders have been cautiously increasing downside exposure. This can be seen by taking a look at IG Client Sentiment (IGCS), which often functions as a contrarian indicator. With that in mind, could further upside progress be in store for the yellow metal in the coming sessions?

Gold Sentiment Outlook – Bearish

The IGCS gauge shows that about 75% of retail traders are net-long gold. Since most of them are biased to the upside, this hints that prices may continue falling down the road. Meanwhile, downside exposure has increased by 23.58% and 26.59% compared to yesterday and last week, respectively. With that in mind, recent changes in positioning hint that the price trend may soon reverse higher despite overall exposure.

XAU/USD Daily Chart

On the daily chart below, gold has extended a cautious push higher above the 38.2% Fibonacci retracement level of 1903.46. That is now placing the focus on the falling trendline from earlier this year. The latter could reinstate the broader downside focus, pushing XAU/USD back to the mid-August swing low of 1884.89.

Otherwise, clearing above the falling trendline, as well as the 1936.90 inflection zone, exposes the 23.6% level of 1971.63 as key resistance. Extending gains beyond that could open the door to revisiting the 2048.79 – 2081.82 resistance zone.

Chart Created in Trading View

— Written by Daniel Dubrovsky, Senior Strategist for DailyFX.com