Preparing for THE Bottom: Part 3 - Gold to Silver Ratio
Gold price edges lower amid an uptick in the US bond yields, though the downside seems cushioned. A positive risk tone is seen as another factor undermining demand for the safe-haven precious metal.
From a technical perspective, weakness back below the $2,300 mark now seems to find decent support near the $2,280 level. The latter coincides with the 50% Fibonacci retracement level of the March-April rally, which, if broken decisively, should pave the way for deeper losses. The Gold price might then accelerate the fall towards the next relevant support near the $2,268-2,265 area en route to the $2,230-2,225 region and the $2,200 round figure.
On the flip side, the immediate hurdle is pegged near the $2,335 supply zone ahead of the weekly top, around the $2,352-2,353 area. A sustained strength beyond could lift the Gold price to the $2,371-2,372 resistance en route to the $2,400 round figure and the all-time peak, around the $2,431-2,432 area touched on April 12.
Gold price (XAU/USD) meets with a fresh supply on Thursday and erodes a part of the previous day's recovery gains from a nearly four-week low. The Federal Reserve (Fed) Chair Jerome Powell told reporters on Wednesday that inflation was too high and progress in bringing it down was uncertain. This, in turn, suggests that the Fed will keep rates higher for longer, which acts as a tailwind for the US Treasury bond yields and undermines demand for the non-yielding yellow metal.
Apart from this, a generally positive risk tone is seen as another factor exerting some downward pressure on the safe-haven Gold price. Meanwhile, the US Dollar (USD) struggles to attract buyers and languishes near a two-week low touched last Friday as Powell downplayed the risk of any further interest rate hikes. This, in turn, could lend some support to the XAU/USD and help limit the downside ahead of the closely-watched US Nonfarm Payrolls (NFP) report on Friday.
SPECIAL WEEKLY FORECAST
Interested in weekly XAU/USD forecasts? Our experts make weekly updates forecasting the next possible moves of the gold-dollar pair. Here you can find the most recent forecast by our market experts:
Gold (XAU/USD) price started the week under heavy bearish pressure and registered its largest one-day loss of the year on Monday. The pair managed to stage a rebound in the second half of the week but closed in negative territory.
EUR/USD is posting small gains above 1.0700 in the European session on Thursday. The pair remains underpinned by a sustained US Dollar weakness, in the aftermath of the Fed policy announcements and ahead of more US employment data.
GBP/USD is consolidating the rebound above 1.2500 in European trading on Thursday. The pair's uptick is supported by a broadly weakness US Dollar on dovish Fed signals. A mixed market mood could cap the GBP/USD upside ahead of mid-tier US data.
The Japanese Yen rallied on Wednesday amid speculations of another intervention by authorities. The momentum, however, runs out of steam on the back of the divergent BoJ-Fed policy outlooks. Traders now look to the second-tier US data for some impetus ahead of the NFP report on Friday.
Gold price edges lower amid an uptick in the US bond yields, though the downside seems cushioned. A positive risk tone is seen as another factor undermining demand for the safe-haven precious metal.
WTI prices loses momentum near seven-week lows of $79.20 on Thursday. A surprise build in US crude stocks weighs on black gold prices. WTI prices edge lower amid signs of easing Middle East geopolitical tensions. The US employment reports on Friday will be closely watched.
Majors
Cryptocurrencies
Signatures
In the XAU/USD Price Forecast 2024, our analyst, Eren Sengezer, notes that Gold carries its bullish potential into early 2024 on prospects of a looser Fed policy, lower US bond yields and a weaker USD. A downturn in the global economy, however, could weigh on demand and limit the precious metal’s gains. A lack of progress in the Fed’s efforts to lower inflation, on the other hand, could cause XAU/USD to turn south. Read more details about the forecast.
The Russia-Ukraine conflict in 2022 and the Israel-Hamas dispute in 2023 underscored Gold's appeal as a safe-haven asset in uncertain times. Further escalation in the Middle East or a resurgence of the Russia-Ukraine conflict may push Gold prices higher.
A potential re-election of former President Donald Trump could involve a 10% tariff on foreign goods and a four-year plan to reduce essential Chinese imports. This could complicate the Federal Reserve's task of lowering inflation to the 2% target and strain relations with China, negatively affecting Gold's demand outlook.
This ratio normally goes well during risk aversion, while it falls off during times of risk-on. If this ratio is about to turn, or at key levels where it could turn, the
trader looks to the Equity indices if the risk has indeed been on and if it is about to turn as well.
When the ratio is rising, it means gold is outperforming silver, and when the line is falling, the first term is doing worse, i.e., silver is doing better. In other words, when the ratio is high, the general consensus is that silver is favored. Conversely, a low ratio tends to favor gold and may be a signal it’s a good time to buy the yellow metal. Despite the gold-to-silver ratio fluctuating so wildly, another way of using it is to switch holdings between silver and gold when the ratio swings to historically determined "extremes."
Read more about gold versus silver:
The main indicators that traders should watch to understand where gold is standing are: