Preparing for THE Bottom: Part 3 - Gold to Silver Ratio
XAU/USD now gathers fresh steam and advances to the highest level in many sessions north of the $2,330 mark per troy ounce on the back of further selling pressure hurting the Greenback as well as mixed US yields.
The daily chart for XAU/USD shows it stalled its recovery around a mildly bullish 20 Simple Moving Average (SMA), which stands at around $2,335. The longer moving averages maintain their upward slopes far below the current level, while technical indicators remain below their midlines without apparent directional strength. Overall, Gold extends its consolidative phase ahead of a relevant directional catalyst.
In the near term, and according to the 4-hour chart, XAU/USD is neutral. The pair met intraday buyers around a bullish 200 SMA but can’t extend gains beyond a mildly bearish 100 SMA. Finally, technical indicators stand flat within positive levels, suggesting bulls are more willing to jump in.
Support levels: 2,322.90 2,310.40 2,291.20
Resistance levels: 2,340.15 2,356.90 2,367.10
Gold price posted an interesting comeback on Thursday, as buyers continued to defend the $2,300 area. XAU/USD fell throughout the first half of the day as the US Dollar benefited from a poor market mood. The Greenback changed course ahead of Wall Street’s opening following the release of the United States (US) Initial Jobless Claims for the week ended May 3. The report showed seasonally adjusted initial claims jumped to 231,000, the highest level since August 2023. The figure revived markets optimism as it is a tepid sign of a loosening labor market. As a result, stock markets surged while the US Dollar fell.
The Bank of England (BoE) announced its decision on monetary policy but had no impact beyond that on the British Pound. The BoE left interest rates unchanged at 5.25% for the sixth consecutive meeting and hinted at soon-to-come rate cuts, as inflation is forecast to fall below target. Policymakers upwardly revised growth figures while noting they would like to see more evidence price pressures are receding before loosening the monetary policy.
On Friday, the US will publish the preliminary estimate of the May Michigan Consumer Sentiment Index, while multiple Federal Reserve (Fed) speakers will hit the wires.
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) price fell more than 2% for the second consecutive week, erased a small portion of its losses but finally came under renewed bearish pressure. The near-term technical outlook points to a loss of bullish momentum as the market focus shifts to Fedspeak.
In line with the broad improvement in the risk appetite, EUR/USD reversed part of the recent weakness and advanced to the vicinity of the 1.0800 region in response to the renewed selling pressure hurting the Dollar.
GBP/USD alternates gains with losses around the 1.2500 neighbourhood amidst extra weakness in the Dollar, while market participants continue to digest the BoE event.
USD/JPY pushes relentlessly higher as market forces overcome intervention attempts. The US Dollar is strengthening across the board as interest rates in the US diverge from the global trend. Weak Japanese wage data puts a dent in BoJ plan to hike interest rates to prop up the Yen.
XAU/USD now gathers fresh steam and advances to the highest level in many sessions north of the $2,330 mark per troy ounce on the back of further selling pressure hurting the Greenback as well as mixed US yields.
Western Texas Intermediate, the US crude oil benchmark, is trading around $78.95 on Thursday. The black gold recovers losses after a surprise crude stock draw in the United States.
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: