Preparing for THE Bottom: Part 3 - Gold to Silver Ratio
Gold Forecast and News
Gold rebounds from daily lows and flirts with $2,670
Following a post-NFP dip to the $2,640 region, Gold prices now embarks on an acceptable rebound and retest the area of $2,670 per ounce troy despite the marked advance in the US Dollar and rising US yields across the board.
Latest XAU/USD News
XAU/USD Technical Overview
From a technical perspective, the range-bound price action might still be categorized as a bullish consolidation phase against the backdrop of the recent strong runup to the record peak. Moreover, oscillators on the daily chart are holding comfortably in positive territory and have also eased from the overbought zone. This, in turn, favors bullish traders and suggests that the path of least resistance for the Gold price remains to the upside. In the meantime, the $2,672-$2,673 area could offer immediate resistance ahead of the $2,685-2,686 zone, or the all-time high touched last week. This is closely followed by the $2,700 mark, which if conquered will set the stage for an extension of a well-established multi-month-old uptrend.
On the flip side, the weekly low, around the $2,625-2,624 area, which coincides with a short-term ascending channel resistance breakpoint, might continue to offer support and act as a key pivotal point. A convincing break below might prompt aggressive technical selling and drag the Gold price below the $2,600 mark, towards the next relevant support near the $2,560 zone. The corrective decline could extend further towards the $2,535-2,530 support before the XAU/USD eventually drops to the $2,500 psychological mark.
Fundamental Overview
Heading into the key data risk, some repositioning trade leads to a modest US Dollar (USD) pullback from a one-month top touched on Thursday and lends some support to the Gold price. Apart from this, persistent risks stemming from the ongoing conflicts in the Middle East turn out to be another factor benefiting the safe-haven precious metal. This, in turn, suggests that the path of least resistance for the XAU/USD is to the upside, which remains within the striking distance of the all-time peak touched last week.
Daily Digest Market Movers: Gold price draws haven flows amid geopolitical risks; focus remains on US NFP
- The US Department of Labor (DOL) reported on Thursday that the number of Americans filing applications for unemployment benefits increased marginally to 225K during the week ended September 28 as compared to the 218K previous.
- This comes on top of a larger-than-anticipated increase in the US private-sector employment in September and an unexpected rise in the number of available jobs in August, providing evidence of a stable and still resilient labor market.
- Separately, the Institute for Supply Management (ISM) said that its Non-Manufacturing PMI rose to 54.9 in September, or the highest level since February 2023, suggesting that the economy remained on a solid footing in the third quarter.
- This further tempers market expectations for another oversized interest rate cut by the Federal Reserve and lifts the US Dollar to a one-month top, which, in turn, is seen as a key factor acting as a headwind for the non-yielding Gold price.
- Hezbollah launched approximately 230 projectiles from Lebanon into Israeli territory on Thursday and Israel launched strikes early on Friday targeting Hezbollah's intelligence headquarters in the southern suburbs of Lebanese capital Beirut.
- Meanwhile, Israel will reportedly carry out a very significant retaliation within days to Iran's onslaught of nearly 200 ballistic missiles on Tuesday night, raising the risk of a full-blown war and lending support to the XAU/USD.
- Traders now look forward to the US Nonfarm Payrolls (NFP) report, which is expected to show that the economy added 140K jobs in September slightly lower than the 142K previous, and the Unemployment Rate held steady at 4.2%.
- This, along with Average Hourly Earnings, will be looked upon for cues about the size of the Fed rate cut in November, which will play a key role in driving the USD demand and provide a fresh directional impetus to the commodity.
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: Supported by safe-haven demand despite broad USD strength Premium
Gold struggled to make a decisive move in either direction this week as the US Dollar strength offset the increasing safe-haven demand for the precious metal. Investors will keep a close eye on geopolitics and US inflation data next week.
Metals Big Picture
METALS BULLISH THEMES
METALS BEARISH THEMES
Latest XAU/USD Analysis
Editors' picks
EUR/USD breaks below 1.1000 on stellar NFP
The buying bias in the Greenback gathers extra pace on Friday after the US economy created far more jobs than initially estimated in September, dragging EUR/USD to the area of new lows near 1.0950.
GBP/USD breaches 1.3100 after encouraging US Payrolls
The continuation of the uptrend in the US Dollar motivates GBP/USD to accelerates its losses and breaches 1.3100 the figure in the wake of the release of US NFP.
Japanese Yen edges higher, upside appears limited due to rising doubts over BoJ rate hikes
The Japanese Yen appreciates as the US Dollar remains tepid ahead of the US labor data release on Friday. Japan’s Economy Minister Akazawa stated that the timing of any monetary policy changes is crucial. Traders await Friday’s US employment data, including Nonfarm Payrolls (NFP) and Average Hourly Earnings, for further direction.
Gold rebounds from daily lows and flirts with $2,670
Following a post-NFP dip to the $2,640 region, Gold prices now embarks on an acceptable rebound and retest the area of $2,670 per ounce troy despite the marked advance in the US Dollar and rising US yields across the board.
Crude Oil faces some profit taking ahead of the weekend after upbeat Nonfarm Payrolls print
Crude Oil eases a touch while over 8% of gains are set to be locked in for this week's performance. US President Joe Biden said on Thursday talks are ongoing with Israel on whether it may attack Iranian oil fields. The US Dollar Index shoots through the roof after stellar Nonfarm Payrolls print urges traders to wind down Fed rate cut bets.
Majors
Cryptocurrencies
Signatures
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.
