Gold Prices, Dow Jones May Rise if Retail Traders Add Onto Downside Exposure

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Gold, XAU/USD, Dow Jones, Technical Analysis, Retail Trader Positioning – Talking Points

  • Retail merchants rising draw back publicity in gold, Dow Jones
  • As a contrarian sign, this may very well be an indication of a rosy path forward
  • XAU/USD and Dow Jones near-term uptrends stay intact

Taking a take a look at IG Client Sentiment (IGCS), retail merchants have been more and more betting that gold costs and the Dow Jones could fall forward. In different phrases, net-long publicity in these belongings is on the decline. IGCS can at instances be a contrarian indicator. With that in thoughts, if this pattern in positioning continues, gold and the Dow Jones may rise within the coming days.

Gold Sentiment Outlook – Bullish

The IGCS gauge exhibits that about 73% of retail merchants are net-long gold. Since most merchants are nonetheless biased to the upside, XAU/USD may fall. However, draw back publicity has elevated by 48.65% and 29.27% in comparison with a day and every week in the past respectively. With that in thoughts, the mix of general and up to date adjustments in positioning presents a bullish-contrarian buying and selling bias.

Technical Analysis

A rising vary of help from August continues to supply an upside technical bias for gold. Broadly talking, nonetheless, the yellow metallic stays unchanged from value ranges seen in July 2020. Immediate resistance seems to be the 1827 – 1834 inflection zone, which stands in the way in which from reaching the November excessive at 1877. Breaking underneath the trendline exposes the December low, which is intently aligned with the 61.8% Fibonacci retracement at 1756.

XAU/USD Daily Chart

Gold Prices, Dow Jones May Rise if Retail Traders Add Onto Downside Exposure

Chart Created in Trading View

Dow Jones Sentiment Outlook – Bullish

The IGCS gauge exhibits that roughly 22% of retail merchants are net-long the Dow Jones. Since most merchants are biased to the draw back, this means costs could proceed rising. This is as quick positioning elevated by 20.29% and 24.86% in comparison with yesterday and final week respectively. With that in thoughts, the mix of general and up to date shifts in positioning presents a bullish-contrarian buying and selling bias.

Gold Prices, Dow Jones May Rise if Retail Traders Add Onto Downside Exposure

Technical Analysis

Dow Jones futures not too long ago closed at an all-time excessive, taking out the November excessive at 36446. That has uncovered the 100% Fibonacci extension at 36991, the place the 123.6% and 138.2% ranges at 37713 and 38161 respectively. This is because the 200-day Simple Moving Average (SMA) continues to supply a broader upside technical bias. That does depart the index weak to a near-term pullback to the latter with out essentially overturning the broader uptrend.

Dow Jones Daily Chart

Gold Prices, Dow Jones May Rise if Retail Traders Add Onto Downside Exposure

Chart Created in Trading View

*IG Client Sentiment Charts and Positioning Data Used from January 4th Report

— Written by Daniel Dubrovsky, Strategist for DailyFX.com

To contact Daniel, use the feedback part beneath or @ddubrovskyFX on Twitter

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