Market update: XAU/USD may remain pressured amid bullish retail traders

Gold prices have been showing a cautious decline in recent weeks, prompting retail traders to gradually increase their upside exposure. This trend is evident in the IG Client Sentiment (IGCS) data, which often serves as a contrarian indicator.

Gold sentiment outlook: Bearish

According to the IGCS gauge, approximately 76% of retail traders are currently net-long on gold. With the majority favoring the upside, it suggests that prices could continue to slide in the future. Notably, there has been an 8.75% increase in upside exposure compared to yesterday, and a significant 27.83% rise compared to last week.

Considering this overall positioning and recent changes, the sentiment points to a stronger bearish contrarian trading bias for XAU/USD.

IG client sentiment chart

Bullish golden cross; upside progress slows

On the daily chart, a bullish Golden Cross was formed between the 20- and 50-day moving averages (MA) in late July. However, since then, the upside progress has been limited, leading to some challenges for the crossover. Currently, immediate support can be found at the rising trendline from February and the 1936 inflection point.

A break below support signals bearish bias

A break below the mentioned support levels would indicate a growing bearish technical bias, aligning with the IGCS signal. On the other hand, as long as the trendline holds, the broader bullish bias remains intact. Further downside movement could lead to the 38.2% Fibonacci retracement level of 1903, which coincides with lows from June. A confirmed breakout below this level might trigger a revisit of the March low.

Alternatively, if the price turns higher from the current levels, the focus would shift to the 23.6% Fibonacci retracement level at 1971.63. Surpassing this level would strengthen the bullish technical view, possibly leading to a revisit of earlier year highs.

XAU/USD daily chart

_{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.}