In recent trading sessions, gold prices have experienced an uptick, accompanied by a noticeable shift in sentiment among retail traders. This transformation is evident when examining IG Client Sentiment (IGCS), often regarded as a contrarian indicator. With these developments in mind, could the changing retail exposure signal a positive turn of events for the precious metal?
The IGCS gauge reveals that approximately 70% of retail traders are currently holding long positions on gold. Given this bullish majority, caution may be warranted as this could potentially pose challenges for gold’s future performance. However, there has been a noteworthy increase in downside exposure, with a rise of 9.49% compared to yesterday and 3.59% compared to last week. This shift in exposure suggests that there might be an impending reversal in the price trend.
On the daily chart, recent gains have propelled gold prices towards confirming a breakout above the descending trendline established since May. Immediate resistance stands at the 1936.90 inflection point. A breakthrough above this level would expose the 23.6% Fibonacci retracement level at 1971.63, further reinforcing the bullish technical outlook.
In the absence of a false breakout, attention may return to the 38.2% level, situated around 1903.46, before bringing the August swing low of 1884.37 into focus. Confirmation of a breakout below the latter would open the door to an extension of the downtrend that has persisted since May.