Gold Price Outlook Mired by Extreme Retail Positioning

Gold Talking Points

Broader outlook for gold prices remain tilt to the downside as the precious metal extends the bearish trend from earlier this year, and the recent rebound appears to stalling at a near-term pivot as the precious metal quickly falls back from the July-high ($1266).

Gold Price Outlook Mired by Extreme Retail Positioning

Image of daily change for gold prices

A look at the monthly opening range suggests a near-term top is in place amid the failed attempts to close above the $1260 (23.6% expansion) hurdle, and gold prices may continue to consolidate over the days ahead as trader sentiment sits at an extreme.

The IG Client Sentiment Report shows 88.2% of traders are still net-long gold, with the ratio of traders long to short at 7.45 to 1. The number of traders net-long is 3.4% lower than yesterday and 2.4% higher from last week, while the number of traders net-short is 5.2% lower than yesterday and 6.8% lower from last week.

The update reinforces a bearish outlook for gold as retail interest remains heavily skewed, with recent price action curbing the threat for a larger recovery as both price and the Relative Strength Index (RSI) preserve the bearish formations from earlier this year.

Gold Daily Chart

Image of gold daily chart

  • Gold prices may face range-bound conditions following the failed attempts to close above the $1260 (23.6% expansion) hurdle, with the lower bounds coming in around $1246 (23.6% expansion) to $1249 (38.2% retracement).
  • However, a break/close below the stated region brings the downside targets back on the radar, with gold at risk of staging a more meaningful run at the December-low ($1236).
  • Next area of interest comes in around $1210 (50% retracement) to $1219 (61.8% retracement) followed by the $1198 (38.2% expansion) region.

For more in-depth analysis, check out the Q3 Forecast for Gold

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— Written by David Song, Currency Analyst

Follow me on Twitter at @DavidJSong.

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