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Market update: XAU/USD two-week performance set for worst since early July?


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Gold two-week drop at -5.3%, most since early July; retail traders keep increasing bullish exposure and this continues to support a bearish contrarian bias.


original-size.webpSource: Bloomberg


Daniel Dubrovsky | Currency Analyst, DailyFX, San Francisco | Publication date: Wednesday 04 October 2023 03:36

So far, over the past two weeks, gold prices have sunk about -5.3%. This is setting the stage for the worst 10-day period for XAU/USD since early July. In response, retail traders continue to increase their bullish exposure in the yellow metal. This can be seen by taking a look at IG Client Sentiment (IGCS), which often functions as a contrarian indicator.

With that in mind, will gold continue lower?

Gold sentiment outlook - bearish

The IGCS gauge shows that about 75% of retail traders are net-long gold. Since most of them remain biased to the upside, this continues to hint that prices may fall down the road. This is as upside bets increased by 0.6% and 2.25% compared to yesterday and last week, respectively. With that in mind, the combination of overall positioning and recent changes produces a stronger bearish outlook.

IG client sentiment chart


original-size.webpSource: DailyFX

XAU/USD technical analysis

On the daily chart, gold has confirmed a breakout under the midpoint of the Fibonacci retracement level of 1848.37. This followed a push under near-term rising support from February and a bearish Death Cross between the 50- and 200-day moving averages. Now, immediate support appears to be the February low of 1804.78.

Breaking lower exposes the 78.6% Fibonacci retracement level of 1714.83 on the way towards the 1614 – 1628 support zone, which was established towards the end of last year. Meanwhile, if prices turn higher this places the focus back on 1848 before the 1884 inflection point comes into focus.

XAU/USD daily chart


original-size.webpSource: TradingView



This information has been prepared by IG, a trading name of IG Australia Pty Ltd. 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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