Over the past 24 hours, gold prices have witnessed a decline of approximately -0.6%, reflecting the market’s ongoing assessment of the Federal Reserve’s recent interest rate decision and the subsequent implications for the precious metal. This decline is part of a broader trend following the Fed’s policy announcements, which have been closely monitored by investors worldwide. As market participants grapple with the Fed’s stance on interest rates and economic outlook, the dynamics of gold trading have evolved in response.
One notable development has been the increased bullish sentiment among retail traders in the gold market. This shift in sentiment can be observed through the lens of IG Client Sentiment (IGCS), a tool that often serves as a contrarian indicator. Currently, the IGCS gauge reveals that approximately 74% of retail traders maintain net-long positions in gold. Given that the majority of retail traders are biased towards the upside, this contrarian indicator suggests the possibility of further price declines in the near future.
Moreover, it is worth noting that the level of upside bets on gold has witnessed notable growth. Comparing the data to the previous day, we see an 8.02% increase in bullish positions, and in comparison to the previous week, an increase of 5.9% has been recorded. This uptick in bullish exposure adds another layer to the bearish contrarian trading bias, as it signifies a potential over-optimism among retail traders despite the recent downward price movement.
Analyzing the daily chart of XAU/USD, we observe that the downward pressure on gold has persistently pushed the price towards a critical juncture. Specifically, the precious metal is approaching a rising support trendline that originates from February. Simultaneously, a short-term falling resistance trendline stemming from July is exerting downward pressure. The convergence of these two trendlines intensifies the likelihood of an impending breakout, making this a pivotal moment for gold traders.
Key support levels to watch closely include the rising trendline and the 38.2% Fibonacci retracement level at 1903.46. A decisive breach of these support levels could potentially pave the way for a stronger bearish bias, with attention turning to the August low of 1884.89 as the next significant support zone. Conversely, should gold find the strength to reverse its current trajectory and break above the falling trendline, it would open the door to a more bullish outlook, with the 23.6% Fibonacci retracement level at 1971.63 as a notable target. The evolving technical landscape suggests that the precious metal’s future price movements will be closely tied to its ability to navigate these key levels and trends.