Preparing for THE Bottom: Part 3 - Gold to Silver Ratio
Gold Forecast and News
Gold loses its bright and tumbles on firm US Dollar, Fed hawkish comments
Gold prices fell in the mid-North American session on Thursday, below $2,390, as US Treasury yields recovered and underpinned the Greenback. Wednesday’s inflation report in the United States sponsored the golden metal rally, but Thursday’s data was a mixed bag, which could likely trigger some profit-taking ahead of the weekend.
Latest XAU/USD News
XAU/USD Technical Overview
The XAU/USD pair is marginally lower on a daily basis, but the overall stance is bullish. The daily chart shows that technical indicators remain within positive levels, partially losing their upward strength but far from suggesting an upcoming decline. At the same time, the pair is developing well above a flat 20 Simple Moving Average (SMA) while the 100 and 200 SMA maintain their bullish slopes below the shorter one, usually a sign of bullish strength.
Technical readings in the 4-hour suggest the recent slide was corrective, and also that XAU/USD is poised to resume its advance. The pair trades well above bullish moving averages while technical indicators consolidate within positive levels, paring their slides from overbought readings. Renewed buying pressure beyond 2,390 will likely result in an advance beyond the $2,400 mark.
Support levels: 2,378.10 2,361.35 2,345.20
Resistance levels: 2,392.50, 2,403.10 2,417.60
Fundamental Overview
Gold trades with a soft tone on Thursday, hovering around the $2,380 level at the time being after peaking earlier in the day at $2,397.34. The US Dollar recovered some ground throughout the first half of the day after falling to fresh multi-week lows against major rivals following the release of discouraging United States (US) data on Wednesday. The country confirmed the Consumer Price Index (CPI) held at 3.4% YoY in April, matching March’s reading and still far from the Federal Reserve’s (Fed) 2% goal.
A mostly quiet European session temporarily helped the USD, but the American currency resumed its slide following the release of dismal US data. On the one hand, Initial Jobless Claims for the week ended May 3 were up by 222K, worse than anticipated. Furthermore, the previous week’s figure was upwardly revised to 232K. Additionally, the country published the May Philadelphia Fed Manufacturing Survey, which contracted to 4.5, also missing expectations. Finally, April Industrial Production remained unchanged, while Capacity Utilization slid to 78.4% from 78.5% in March.
Wall Street shrugged off the negative headlines, and the three major indexes trade in the green, although gains are modest. Speculative interest somehow believes negative figures could speed up the Fed’s decision to cut interest rates, retaining optimism.
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: Bulls return and aim for record highs Premium
Spot Gold price (XAU/USD) heads into the weekly close posting solid gains and changing hands at around $2,360 a troy ounce. XAU/USD struggled for direction, spending most of the week hovering between $2,300 and $2,330.
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METALS BULLISH THEMES
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Latest XAU/USD Analysis
Editors' picks
EUR/USD slipped on Thursday after Greenback pares some losses
EUR/USD eased slightly on Thursday, falling back below 1.0880 as the Greenback broadly recovers losses from earlier in the week. The pair remains up for the trading week, but a late break for the US Dollar is on the cards as investors second-guess the Fed's stance on rate cuts.
GBP/USD posts modest gains above 1.2650, focus on the Fedspeak
The GBP/USD pair posts modest gains near 1.2670 during the early Asian session on Friday. Meanwhile, the USD Index recovers some lost ground after retracing to multi-week lows near 104.00 in the previous session.
USD/JPY back above 155.00 amidst broad-market Yen weakness
USD/JPY recovered ground on Thursday, climbing back over the 155.00 handle after dipping to 153.60 on Wednesday. Japanese growth figures contracted more than expected, and Federal Reserve rate cut hopes are struggling beneath the weight of cautionary talking points from Fed officials.
Gold loses its bright and tumbles on firm US Dollar, Fed hawkish comments
Gold prices fell in the mid-North American session on Thursday, below $2,390, as US Treasury yields recovered and underpinned the Greenback. Wednesday’s inflation report in the United States sponsored the golden metal rally, but Thursday’s data was a mixed bag, which could likely trigger some profit-taking ahead of the weekend.
Oil extends the rally near $78.90, US inflation data boosts Fed rate cut expectations
Western Texas Intermediate, the US crude oil benchmark, is trading around $78.90 on Friday. The black gold edges higher amid the recent drop in US crude inventories and the possible interest rate cuts by the Federal Reserve.
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XAU/USD YEARLY FORECAST
How could XAU/USD move this year? Our experts make a XAU/USD update forecasting the possible moves of the gold-dollar pair during the whole year. Don't miss our 2024 XAU/USD forecast!
2024 FORECAST FOR XAU/USD
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.
MOST INFLUENTIAL POLITICAL EVENTS IN 2024 FOR XAU/USD
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.
Gold/Silver Ratio
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:
About Gold
XAU/USD, GOLD
In the Forex market, gold is a form of currency. The particularity of gold is that it can only be traded against United States dollars (USD). The internationally accepted code for gold is XAU. It is known to be a “safe-haven” asset, it is expected to increase its value in times of volatility and economic uncertainty.
The XAU/USD pair tells the trader how many US Dollar (the quote currency) are needed to purchase one Gold Ounce (the base currency). United States is the country that holds the biggest resources of gold in the world.
ORGANIZATIONS THAT INFLUENCE XAU/USD THE MOST
- WGC (World Gold Council), the market development organisation for the gold industry whose aim is to stimulate and sustain demand for that commodity.
- LBMA, London Bullion Market Association, whose members conduct trading in this wholesale over-the-counter market for the trading of gold and silver. It is loosely overseen by the Bank of England. Most of the members are major international banks or bullion dealers and refiners.
- COMEX (Commodity Exchange Inc.), the primary market for trading metals. The COMEX merged with the New York Mercantile exchange (NYMEX) in 1994 and became the division responsible for metals trading.
- Zurich Gold Pool founded in 1968 by the largest banks in Switzerland after the collapse of the London Gold Pool.
- CGSE, the Chinese Gold & Silver Exchange Society (see above the importance of China in terms of gold reserve).
PEOPLE THAT INFLUENCE XAU/USD THE MOST
- David Harquail, the World Gold Council’s Chairman
- Steven Mnuchin, US Treasury Secretary
- Xi Jinping, President of the People's Republic of China and General Secretary of the Communist Party of China
ECONOMIC DATA THAT INFLUENCE XAU/USD THE MOST
The main indicators that traders should watch to understand where gold is standing are:
- Demand vs Supply for the commodity
- Struggling markets or context of currency devaluation: gold is known to be a haven for investors in times of economic uncertainty or when any country sees its currency devaluing
- Practical applications: technology invents, jewellery use, etc
ASSETS THAT INFLUENCE XAU/USD THE MOST
- Currencies: USD and EUR. Other important group of influent pairs includes: EUR/USD, GBP/USD, USD/JPY, AUD/USD, USD/CHF, NZD/USD and USD/CAD.
- Commodities: Silver, the other most important precious metal commodity together with Gold.
- Bonds: Bund (the German word for "bond", a debt security issued by Germany's federal government) and T-Note (Treasury Note, a marketable U.S. government debt security)
- Indices: Hui (AMEX Gold BUGS), XAU (Philadelphia Gold and Silver Sector Index) and GDM (NYSE Arca Gold Miners Index) The most important stock exchanges are the New York Mercantile Exchange (COMEX), the Chicago Board of Trade, the Euronext/LIFFE, the London Bullion Market, the Tokyo Commodity Exchange, the Bolsa der Mercadorias e Futuros and the Korea Futures Exchange.
