Preparing for THE Bottom: Part 3 - Gold to Silver Ratio
Following a consolidation phase near $2,640, Gold gains traction and rises to the $2,650 area. The benchmark 10-year US Treasury bond yield pushes lower after weak macroeconomic data releases from the US, helping XAU/USD stretch higher.
From a technical perspective, the recent range-bound price action might still be categorized as a bearish consolidation phase against the backdrop of last week's decline. Adding to this, this week's breakdown below a four-day-old ascending channel favors bearish traders. That said, neutral oscillators on the daily chart suggest that any further slide below the overnight swing low, around the $2,622-2,621 area, might continue to find some support near the $2,600 mark. Some follow-through selling, meanwhile, might expose the 100-day Simple Moving Average (SMA), currently around the $2,579-2,78 zone, below which the Gold price could retest the November monthly trough, around the $2,537-2,536 region.
On the flip side, the $2,655 area, followed by the $2,666 region might act as immediate strong barriers. The next relevant hurdle is pegged near the $2,677-2,678 zone, above which the Gold price could aim to reclaim the $2,700 round figure. Any further move up is likely to confront stiff resistance near the $2,721-2,722 supply zone. A sustained strength beyond the latter might shift the bias in favor of bullish traders and pave the way for some meaningful appreciating move in the near term.
Gold price (XAU/USD) attracts some sellers following an intraday uptick to the $2,650 supply zone and hits a fresh daily low during the first half of the European session on Wednesday. The precious metal, however, remains confined in a familiar range held over the past week or so as traders seem reluctant to place aggressive directional bets ahead of Federal Reserve (Fed) Chair Jerome Powell's speech. Investors will look for cues about the future rate-cut path, which, in turn, will drive the US Dollar (USD) demand and provide some meaningful impetus to the commodity.
Meanwhile, easing fears of a significant slowdown in the US labor market and expectations that Trump's expansionary policies will boost inflation suggest that the Fed might adopt a cautious stance on cutting rates. The outlook remains supportive of a modest uptick in the US Treasury bond yields, which act as a tailwind for the USD and undermine demand for the non-yielding Gold price. That said, persistent geopolitical tensions, worries about US President-elect Donald Trump's tariff plans and political turmoil in South Korea should limit losses for the safe-haven XAU/USD.
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) declined sharply on easing geopolitical concerns on Monday and spent the rest of the week trying to recover its losses. Employment-related macroeconomic data releases from the US could alter the expectations about the Federal Reserve’s policy decision in December and trigger the next big action in XAU/USD.
EUR/USD holds steady at around 1.0500 in the American session on Wednesday. The weaker-than-expected ADP Employment Change and the ISM Services PMI data hurt the USD and help the pair keep its footing. Fed Chairman Powell will speak later in the day.
Following a pullback, GBP/USD edges higher toward 1.2700 in the second half of the day on Wednesday as the US Dollar loses strength following the disappointing data releases. Markets eagerly await Fed Chairman Jerome Powell's speech.
USD/JPY gains strong positive traction on Wednesday, though the upside potential seems limited. Less dovish Fed expectations push the US bond yields higher and undermine the lower-yielding JPY. December BoJ rate hike bets and subdued USD demand might cap the pair ahead of Fed’s Powell.
Following a consolidation phase near $2,640, Gold gains traction and rises to the $2,650 area. The benchmark 10-year US Treasury bond yield pushes lower after weak macroeconomic data releases from the US, helping XAU/USD stretch higher.
Oil price turns flat after having peaked above $70.00 briefly with US stockpiles building. Tensions brew in the Middle East with President-elect Donald Trump vowing to iniate war if Israeli hostages are not released. The US Dollar Index ticks up on Fed officials pushing back on odds for a rate cut in December.
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: