Sentiment towards a number of currency precious messages is changing. Now is a great time to check out how traders feel about gold, silver, and copper. Some of the most extreme sentiment traders look for contrarian trading signals via sentiment readings.
Trading sentiment is most effective when retail traders are running counter trend, meaning that they are heavily leaning against established market trends and in increasingly large numbers. Additionally, once big sentiment skews build it can be a powerful sign that the retail crowd are being too one-sided.
Typically, market sentiment readings for an instrument that has reached around 75 to 80 percent is considered to be at an extreme level, while market sentiment readings over 80 to 95 percent is often a strong indication that the trade could be topping or about to reverse at any time.
I will now look at the strongest sentiment bias amongst the retail crowd right now. Some of the sentiment skews suggest that current price trends in FX, stocks, and precious metals are breaking point and big moves may be nearing.
GOLD – Not Bad
According to the ActivTrader Market Sentiment tool a small amount of traders are still bearish towards the price of gold, despite its rally towards the 1,885 level.
The ActivTrader Market Sentiment tool shows that only 46 percent of traders are expecting more upside in the yellow metal. This is a small increase since the previous trading week.
It should be noted that sentiment is very crucial for the price of gold, as we typically look to fade extreme sentiment biases in the precious metal sector.
Copper – Very High
The ActivTrader market sentiment tool shows that only 8 percent of traders are bullish towards the price of copper as it continues to explode above the $400.00 level.
The sentiment bias certainly alludes to more upside trading, however, it is important to state that the bearish sentiment extreme could allude to a major unwinding at some point.
I think we also have to consider that the USDCHF pair is a mirror of the EURUSD pair, so watching the EURUSD pairs next move could be key.
SILVER – Very Bullish
Market sentiment towards the price of silver is still bullish, which is a good sign for bears as one-sided sentiment skews tends to mean the opposite in terms of what traders are expecting.
The ActivTrader market sentiment tool showing that only 29 percent of traders currently bullish towards the shiny metal right now.
I think it is worth noting that the only when traders start to turn bearish then the upside should start to pick-up as silver’s gain currently lag the other precious metals.
