Preparing for THE Bottom: Part 3 - Gold to Silver Ratio
Gold Forecast and News
Gold shines bright and hits three-day high despite Fed hawkish commentary
Gold price was modestly up late in the North American session, registering gains of around 0.15% amid high US Treasury bond yields that make it less appealing to hold the non-yielding metal. Consequently, the Greenback erased its previous losses, capping Gold’s rally. The XAU/USD trades around $2,357.
Latest XAU/USD News
XAU/USD Technical Overview
XAU/USD is up for a third consecutive day. In the daily chart, technical indicators have partially lost their upward strength but hold within positive levels. At the same time, the pair is hovering around a mildly bullish 20 Simple Moving Average (SMA), while the longer moving averages head firmly north, far below the current level. The overall stance is positive, albeit the momentum is missing.
In the near term, and according to the 4-hour chart, XAU/USD has turned neutral. The Momentum indicator is flat, just above its 100 level, while the Relative Strength Index (RSI) indicator aims marginally higher at around 49. The 20 SMA heads south below the longer ones, yet the pair met intraday support around it, while a mildly bullish 100 SMA acts as dynamic resistance around $2,360.
Support levels: 2,340.20 2,325.30 2,307.10
Resistance levels: 2,364.00 2,372.90 2,384.15
Fundamental Overview
Gold kept recovering on the broad US Dollar's weakness and regardless of the market mood, with XAU/USD trading around $2,360. The Greenback enjoyed temporal demand at the beginning of the American session, following the release of upbeat data.
The United States (US) released the S&P/Case-Shiller Home Price Index, which improved to 7.4% in March, beating expectations. Also, the Conference Board Consumer Confidence Index unexpectedly improved in May to 102.0 from an upwardly revised 97.5 in April. The Present Situation sub-index increased to 143.1 from 140.6 previously, while the Expectations sub-index rose to 74.6 from 68.8, still below the 80 threshold, which usually signals a recession ahead.
Wall Street, however, could not take advantage of the news. Following the dismal performance of their overseas counterparts, US indexes trade with a mixed tone, with the Dow Jones Industrial Average (DJIA) dipping in the red, the S&P500 hovering around its opening level, and the Nasdaq Composite up 82 points.
Meanwhile, Federal Reserve (Fed) officials delivered cautious words about inflation. On the one hand, Governor Michelle Bownan said she would have supported either waiting to slow the quantitative tightening pace or a more tapered slowing in balance sheet run-off. On the other, Minneapolis Fed's President Neel Kashkari said the US economy has remained remarkably resilient and that he does not see a need to hurry to cut rates. He added that policymakers should not rule anything out on the monetary policy path and that he would prefer to see more months of positive inflation data before a rate cut.
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 could extend correction if it fails to reclaim $2,400 Premium
After setting a new all-time high at the beginning of the week at $2,450, Gold staged a deep correction and extended its slide after breaking below $2,400 on Wednesday.
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EUR/USD churns chart paper but makes little progress ahead of Wednesday’s German CPI inflation
EUR/USD rose to an intraday high near 1.0890 on Tuesday before market flows dragged the pair back down to familiar levels near 1.0860, and the pair is holding on-balance as Euro traders head into a fresh print of German Consumer Price Index inflation.
GBP/USD turns negative near 1.2760
Following the early move to multi-week tops around 1.2800 the figure, GBP/USD lost impetus pari passu with the late rebound in the US Dollar against the backdrop of a marked improvement in US yields, dwindling rate cut bets and hawkish Fedspeak.
Japanese Yen loses ground, while US Dollar remains steady amid investors' caution
The Japanese Yen struggled after Japan's Weighted Median Inflation Index showed a slowdown. Japan’s Corporate Service Price Index posted a reading of 2.8% YoY in April, marking its fastest increase since March 2015. The decline in US Treasury yields put pressure on the US Dollar.
Gold shines bright and hits three-day high despite Fed hawkish commentary
Gold price was modestly up late in the North American session, registering gains of around 0.15% amid high US Treasury bond yields that make it less appealing to hold the non-yielding metal. Consequently, the Greenback erased its previous losses, capping Gold’s rally. The XAU/USD trades around $2,357.
Crude Oil extends gains, WTI breaks $80 as markets look to OPEC+
West Texas Intermediate (WTI) US Crude Oil rose on Tuesday as energy markets look to production cuts from the Organization of the Petroleum Exporting Countries (OPEC), and its extended network of non-member partner countries OPEC+, to maintain production cuts in order to try and tamp down global Crude Oil production in the face of disappointing demand.
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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.
