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Market update: XAU/USD flirts with breakout as retail traders turn more bearish


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Gold prices climbed for another day, while retail traders turn more bearish and investors ponder an XAU/USD trendline breakout.

 

original-size.webpSource: Bloomberg

 
Daniel Dubrovsky | Currency Analyst, DailyFX, San Francisco | Publication date: Tuesday 19 September 2023 05:16

Gold sentiment outlook - bullish

Gold prices have rallied for a couple of trading sessions and retail traders have responded by increasing their downside exposure. This can be seen by looking at IG Client Sentiment (IGCS), which often functions as a contrarian indicator. With that in mind, will an increasing shift in retail exposure offer a warm welcome for the yellow metal?

The IGCS gauge shows that about 70% of retail traders are net-long gold. Since the majority of them are biased to the upside, this still could spell trouble for gold down the road. That said, downside exposure has increased by 9.49% and 3.59% compared to yesterday and last week, respectively. With that in mind, recent changes in exposure hint that the price trend may soon reverse higher.

IG Client Sentiment chart

 

original-size.webpSource: DailyFX

Gold technical analysis

On the daily chart, recent gains have pushed gold prices to flirt confirming a breakout above the falling trendline from May. Immediate resistance is the 1936.90 inflection point. A push above that exposes the 23.6% Fibonacci retracement level of 1971.63, opening the door to an increasingly bullish technical bias.

Otherwise, a false breakout places the focus back on the 38.2% point around 1903.46 before exposing the August swing low of 1884.37. Confirming a breakout under the latter opens the door to extending the downtrend since May.

XAU/USD daily chart

 

original-size.webpSource: TradingView

 

 

 

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