Preparing for THE Bottom: Part 3 - Gold to Silver Ratio
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.
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.
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.
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 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.
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.
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.
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.
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 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
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: