Retail Traders Stay Long Despite Downside Risks

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Gold, XAU/USD, Silver, XAG/USD, Technical Analysis, Retail Trader Positioning – Talking Points

  • Fundamental Analysis Hints Gold and Silver May Continue to Fall
  • Retail trader bets offer a bullish view on gold and a bearish view on silver
  • How do the techniques align with the fundamentals, the positioning?

Gold and silver prices have struggled to find upward momentum in recent weeks amid global central bank efforts to rein in high inflation. This creates a difficult fundamental environment for these anti-fiat precious metals. How have retail traders positioned themselves in XAU/USD and XAG/USD amid recent price action and what might this mean for the road ahead? For further analysis, check out the recording of this week’s webinar above.

Gold Sentiment Outlook – Bullish

The IGC gauge shows that around 81% of retail traders are net buyers of gold. The IGCS tends to work as a contrarian indicator. As such, the fact that traders remain net long suggests that prices may continue to decline. However, short bets are up 2.2% and 20.32% respectively from yesterday and last week. With that in mind, recent shifts in sentiment warn that gold could reverse higher.

XAU/USD daily chart

On the daily chart, XAU/USD remains in a downtrend since early March, but recent price action looks neutral. The yellow metal seems to be consolidating between resistance (1869 – 1879) and support (1787 – 1810). In fact, it looks like gold might form a bearish rectangle. A break below the support range could be a sign of a resumption of the downtrend. This would emphasize the December lows. Alternatively, pushing above resistance could alter the outlook increasingly bullish.

Gold and Silver Price Prediction: Retail Traders Stay Long Despite Downside Risks

Chart created in the trading view

Silver Sentiment Outlook – Bearish

The IGC gauge shows that around 95% of retail investors are net buyers of silver. Since almost the absolute majority of traders are positioned higher, this is a sign that prices may continue to decline. Downside exposure has decreased recently, down 12.79% and 33.92% respectively from yesterday and last week. With that in mind, the combination of the current readings and recent changes in the IGCS suggest that silver may remain biased to the downside.

Gold and Silver Price Prediction: Retail Traders Stay Long Despite Downside Risks

XAG/USD daily chart

As with gold, silver prices have been on a downtrend since early March. Recent price action has also looked neutral. A bearish death cross remains between the 20- and 50-day simple moving averages (SMA), providing a downward bias. Key support appears to be the May low at 20.46. Clearing the latter exposes the midpoint of the Fibonacci extension at 19.63. Otherwise, clearing resistance (22.20 – 22.51) opens the door for a bullish technical outlook.

Gold and Silver Price Prediction: Retail Traders Stay Long Despite Downside Risks

Chart created in the trading view

* IG customer opinion charts and positioning data used from June 21st Report

— Written by Daniel Dubrovsky, Strategist for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter

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