Preparing for THE Bottom: Part 3 - Gold to Silver Ratio
Gold Forecast and News
Gold price pulls back as market sentiment improves
The Gold price is trading in the $2,310s on Thursday after retracing about three-tenths of a percent on reduced safe-haven demand. Market sentiment is overall positive as Asian stocks on balance closed higher and Oil prices hover at seven-week lows.
Latest XAU/USD News
XAU/USD Technical Overview
Gold price (XAU/USD) has fulfilled the minimum requirement for completing its bearish Measured Move price pattern after hitting the Fibonacci 0.681 price objective for the final C wave at $2,286. This could mean prices will now track higher.
Measured Move patterns are composed of three waves that trace out a zig-zag. The end of the final C wave can be estimated based on the length of wave A. It is usually either equal in length to A or a Fibonacci 0.681 ratio of A.
Directionally, Gold is in a bit of a no-man’s land: a break below the 0.681 Fibonacci target lows at $2,285 would be needed to confirm more downside to a target at $2,245 (1.000 or where A=C).
Alternatively, a break above the cluster of Moving Averages and the peak of wave B at around $2,350 would potentially usher in a new more bullish environment. This could then see a retest of the $2,400 highs.
Additionally, the trend for Gold price is up both in the medium and long-term, overall supporting the outlook.
Fundamental Overview
The Gold price (XAU/USD) is trading in the $2,310s on Thursday after retracing about three-tenths of a percent on reduced safe-haven demand. Market sentiment is overall positive as Asian stocks on balance closed higher and Oil prices hover at seven-week lows.
Gold price rallies after Federal Reserve meeting
Gold price surged over $30 an ounce after the US Federal Reserve (Fed) adopted an overall easing bias at its May policy meeting on Wednesday.
Gold bulls bid up the price after the Fed decided to leave interest rates unchanged and to slow the pace of reduction of its US Treasury holdings, a mildly dovish move as it unwinds quantitative tightening.
Yet the Fed also added a hawkish phrase to its statement to reflect the continued stubbornness of US inflation, saying that, “in recent months, there has been a lack of further progress toward the Committee’s 2 percent inflation objective.”
Concerns, however, that the Fed might actually consider raising interest rates – something that would be detrimental to non-yielding Gold – were allayed after the Federal Reserve Chairman Jerome Powell described such a move as “unlikely”.
In his prepared remarks, Powell dropped any reference to reducing interest rates this year, and sidestepped questions about whether the Fed would still be cutting rates in 2024, in the Q&A. Yet, although the overall take-away was that rates were not coming down any time soon, additional rate-hikes were not on the table either.
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: Strength of $2,300 support is an encouraging sign for bulls Premium
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.
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Editors' picks
EUR/USD hovers near 1.0700 even as USD struggles ahead of data
EUR/USD has erased gains to trade flat near 1.0700 in the European session on Thursday. The pair comes under pressure even as the US Dollar struggles, in the aftermath of the Fed policy announcements and ahead of more US employment data.
GBP/USD turns south toward 1.2500, US data eyed
GBP/USD is consolidating the rebound above 1.2500 in European trading on Thursday. The pair struggles, despite the US Dollar weakness on dovish Fed signals. A mixed market mood caps the GBP/USD upside ahead of mid-tier US data.
Japanese Yen bounces off daily low, keeps the red around mid-155.00s against USD
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 pulls back as market sentiment improves
The Gold price is trading in the $2,310s on Thursday after retracing about three-tenths of a percent on reduced safe-haven demand. Market sentiment is overall positive as Asian stocks on balance closed higher and Oil prices hover at seven-week lows.
WTI drops to seven-week lows below $80.00 on surprise build crude inventories
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.
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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.
