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Gold and Silver Price Outlook: Rising Long Bets Warn to Proceed with Caution

Gold and Silver Price Outlook: Rising Long Bets Warn to Proceed with Caution

Daniel Dubrovsky, Strategist

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

  • Retail traders are betting that gold and silver prices may rise
  • This is measured by IGCS, which can be a contrarian indicator
  • Will the bearish implications of Rising Wedges see follow-through?

According to IG Client Sentiment (IGCS), retail traders appear to be increasingly betting that gold and silver prices may rally ahead. IGCS can at times be a contrarian indicator. If this trend in positioning continues, these precious metals could be left vulnerable instead. To learn more, check out this week’s recording of my webinar above where I discussed how you can use IGCS in trading markets.

Gold Sentiment Outlook - Bearish

The IGCS gauge implies that roughly 71% of retail traders are net-long gold. Upside exposure has increased by 3.19% and 3.95% over a daily and weekly basis respectively. The fact that traders are net-long suggests prices may continue to fall. Recent shifts in sentiment are also further underscoring the outlook to the downside for the precious metal.

Gold and Silver Price Outlook: Rising Long Bets Warn to Proceed with Caution

Technical Analysis

On the 4-hour chart below, XAU/USD appears to be consolidating higher within the boundaries of a bearish Rising Wedge chart formation. This may keep prices tilted to the upside in the interim, especially after taking out falling resistance from June. However, breaking under the wedge may open the door to a material turn lower. This is as negative RSI divergence shows that upside momentum is fading, which can at times precede a turn lower. Key resistance appears to be the 1825 – 1834 zone, with support at 1778.

Gold 4-Hour Chart

Gold and Silver Price Outlook: Rising Long Bets Warn to Proceed with Caution

Chart Created in Trading View

Silver Sentiment Outlook - Bearish

The IGCS gauge implies that about 88% of retail investors are net-long silver. Downside exposure has decreased by 1.99% and 9.76% over a daily and weekly basis respectively. The fact that traders are net-long hints that prices may fall. This and the combination of recent changes in positioning warn that the outlook for silver may remain tilted to the downside.

Gold and Silver Price Outlook: Rising Long Bets Warn to Proceed with Caution

Technical Analysis

Silver prices also appear to be consolidating higher within the boundaries of a bearish Rising Wedge chart pattern. On the 4-hour chart below, the 200-period Simple Moving Average (SMA) can be seen approaching current price levels. The SMA could reinstate the dominant downward bias. Negative RSI divergence is also persisting, warning that a turn lower could be in the cards. Breaching the floor of the wedge may open the door to revisiting the August low at 22.292.

Silver 4-Hour Chart

Gold and Silver Price Outlook: Rising Long Bets Warn to Proceed with Caution

Chart Created in Trading View

*IG Client Sentiment Charts and Positioning Data Used from September 1st Report

--- Written by Daniel Dubrovsky, Strategist for DailyFX.com

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

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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