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Market update: XAU/USD faces key technical intersection as retail traders sell

Gold prices remain higher compared to mid-August, while retail traders continued boosting downside exposure and will be watching to see if XAU/USD would clear a key technical intersection.

Source: Bloomberg

Gold sentiment outlook: bullish

Gold prices remain over 3% higher compared to the middle of August. Since then, retail traders have continued to increase downside exposure. This can be seen by taking a look at IG Client Sentiment (IGCS), which often functions as a contrarian indicator. With that in mind, could the yellow metal extend its recent winning streak?

The IGCS gauge shows that about 65% of retail traders are net-long gold. Since most of them are biased to the upside, this continues to hint that prices may decline down the road. But, downside exposure has increased by 4.61% and 42.15% compared to yesterday and last week, respectively.

With that in mind, despite overall positioning, recent changes in exposure hint that the current price trend may extend higher.

IG client sentiment chart

Source: DailyFX

Gold technical analysis

On the daily chart, gold prices are facing the next critical technical test. It is the intersection of a falling trendline from May and former rising support from the end of last year – highlighted as the pink circle in the daily chart below. A hold at resistance would open the door to extending the downtrend since earlier this year.

That would place the focus on near-term support which is the 38.2% Fibonacci retracement level of 1903.46. Beyond that sits the August swing low of 1884.89. Clearing the latter opens the door to resuming broader losses since May. Otherwise, pushing above resistance offers an increasingly bullish technical outlook, placing the focus on the 23.6% Fibonacci retracement level of 1971.63.

XAU/USD daily chart

Source: TradingView

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.


The information 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 Bank S.A. 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 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. See full non-independent research disclaimer.

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