Gold, XAU/USD, Retail Sales, IGCS, Technical Analysis – Briefing:

• Gold prices are heading for the worst month since June 2021
• Retail traders boosted long bets on Wednesday, a bearish sign
• XAU/USD confirmed a breakout under a key moving average

Gold prices sank about 1 percent on Wednesday, with the precious metal closing at its lowest since the end of last year. Markets digested a better-than-expected US retail sales print, which followed a hotter-than-anticipated CPI report on the previous day. Both events helped drive up the US Dollar, which tends to inversely track XAU/USD.

The anti-fiat yellow metal is on course for the worst monthly performance since June 2021 if losses hold. Fading Federal Reserve rate cut bets have been boosting Treasury yields, further pressuring gold prices. Over the remaining 24 hours, gold traders should watch out for US PPI data, due at 13:30 GMT. Unexpectedly hotter wholesale inflation may further pressure the precious metal.

IG Client Sentiment Analysis

According to IG Client Sentiment, about 72% of retail traders are net-long gold. IGCS tends to function as a contrarian indicator. As such, since most traders are net-long gold, this could hint at further pain ahead. This is as upside exposure increased by 11.83% and 3.61% compared to yesterday and last week, respectively. With that in mind, these readings offer a stronger bearish contrarian trading bias.

Technical Analysis

On the daily chart, gold has confirmed a breakout under the 50-day Simple Moving Average (SMA). This follows the emergence of a Bearish Engulfing candlestick pattern from January, which hinted at a reversal. Now, prices are increasingly at risk of extending losses. Immediate support is the 38.2% Fibonacci retracement level at 1828. Clearing this price exposes the midpoint at 1787. Otherwise, a turn back above the 50-day SMA will place the focus on the 20-day line. The latter may hold as resistance, reinstating a near-term downside bias.

XAU/USD Daily Chart

Chart Created Using TradingView

— Written by Daniel Dubrovsky, Senior Strategist for DailyFX.com

To contact Daniel, follow him on Twitter:@ddubrovskyFX