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Gold and silver price outlook: XAU, XAG may fall as retail crowd goes long


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Gold and silver prices continue lower, retail traders more bullish; from a contrarian standpoint, this is an increasingly bearish view and Death Crosses might be on the horizon soon using the daily setting.

 

bg_silver_363631773.jpgSource: Bloomberg

 

Daniel Dubrovsky | Currency Analyst, DailyFX, San Francisco | Publication date: Wednesday 24 May 2023 

Gold and silver prices continued aiming lower in recent days, accelerating a decline since finding a top in late April. By looking at IG Client Sentiment (IGCS), we can see how retail traders have been evolving their exposure in these precious metals. IGCS tends to function as a contrarian indicator, especially in trending markets.

With that in mind, could further pain be in store for XAU/USD and XAG/USD?

Gold sentiment outlook - bearish

The IGCS gauge shows that about 66% of retail traders are net-long gold. Since most of them are biased higher, this hints that prices may continue falling. This is as upside exposure increased by 1.79% and 12.32% compared to yesterday and last week, respectively.

With that in mind, the combination of current sentiment and recent changes offers a stronger bearish contrarian trading bias.

 

original-size.webpSource: TradingView

XAU/USD daily chart

On the daily chart, a bearish Death Cross between the 20- and 50-day moving averages could be in store for gold. This is as prices are testing the 23.6% Fibonacci retracement level at 1971. Confirming a downside breakout exposes the 38.2% level at 1903.

Otherwise, a turn higher places the focus on current 2023 highs, making for a wide range of resistance between 2048 – 2081.

 

original-size.webpSource: TradingView

Silver sentiment outlook - bearish

The IGCS gauge reveals that roughly 83% of retail traders are net-long silver. Since most of them are net-long, this hints that prices may continue falling. This is as downside exposure decreased by 2.6% and 24.81% compared to yesterday and last week, respectively.

With that in mind, this is producing a stronger bearish contrarian trading bias.

 

original-size.webpSource: TradingView

XAG/USD daily chart

A bearish Death Cross between the same moving averages may also be in store for silver soon. That would open the door to an increasingly downside technical bias. Immediate support is the midpoint of the Fibonacci retracement at 23.02. Extending lower exposes the 61.8% point at 22.2917. Otherwise, a turn higher places the focus on the 38.2% level at 23.757.

 

original-size.webpSource: TradingView

This information has been prepared by DailyFX, the partner site of IG offering leading forex news and analysis. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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