XAU/USD, XAG/USD may rise as retail traders sell

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

  • Retail traders turn gold and silver increasingly bearish
  • This could portend further gains for precious metals
  • Check out the webinar for a dive into the fundamentals

Gold and silver prices have been rising lately, following a decline in US dollar and Treasury yields. Now, retail traders are increasingly betting that XAU/USD and XAG/USD could reverse lower. This can be seen by looking at IG Client Sentiment (IGCS), which tends to behave like a contrarian indicator. With that in mind, could an increasingly bearish shift among retail traders portend further gains to come for precious metals? For a deeper dive into the fundamentals, check out the webinar recording above!

Gold Sentiment Outlook – Bullish

The IGC gauge shows that around 84% of retail traders are net buyers of gold. Given that most traders are still supportive of the upside, this suggests that prices may continue to decline. However, the downside exposure increased by 3.03% and 16.08% from yesterday and last week respectively. With that in mind, recent positioning changes hint that the price trend may soon reverse to the upside.

Technical analysis XAU/USD

On the daily chart, gold confirmed a break above the short-term downtrend line from late April. This opened the door for the reversal of the downtrend since then. Recently, prices have also removed the 20-day simple moving average (SMA), exposing the 50-day line. Overall, this could portend further gains. Otherwise, a lower turn would emphasize the 1787 – 1810 support area.

Gold and Silver Price Prediction: XAU/USD, XAG/USD May Rise as Retail Traders Sell

Chart created in the trading view

Money Sentiment Outlook – Bullish

The IGC gauge shows that around 95% of retail traders are net long in the money. Given that the majority of them are still heavily biased to the upside, this suggests that prices may continue to decline. However, the downside exposure increased by 9.57% and 6.78% from yesterday and last week respectively. With that in mind, recent positioning changes hint that silver may soon reverse higher.

Gold and Silver Price Prediction: XAU/USD, XAG/USD May Rise as Retail Traders Sell

Technical analysis XAG/USD

Silver prices confirmed a break above the downtrend line from mid-April, opening the door for extended gains. Still, prices were unable to break above the former support zone of 21.42 at 22.26, which could be a new resistance. A break higher exposes the 50-day SMA, which could reestablish the downward direction. Such a result would bring attention back to May 13e low at 20.462.

Gold and Silver Price Prediction: XAU/USD, XAG/USD May Rise as Retail Traders Sell

Chart created in the trading view

* IG customer opinion charts and positioning data used from May 24e 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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