Preparing for THE Bottom: Part 3 - Gold to Silver Ratio
Gold Forecast and News
Gold needs acceptance above 2,660 to unleash additional recovery
Gold price is sitting at the highest level in over a week above the $2,650 barrier in the Asian trading hours on Thursday. All eyes remain on the speeches from several US Federal Reserve (Fed) policymakers and Russia and Ukraine geopolitical updates, in the absence of top-tier US economic data releases.
Latest XAU/USD News
XAU/USD Technical Overview
The short-term technical outlook for Gold price appears to lean in favor of buyers as the 14-day Relative Strength Index (RSI) prods the 50 level to the upside. The indicator is currently just above 50.
However, an impending Bear Cross could be a headwind for Gold price. The 21-day Simple Moving Average (SMA) is closing in to cut the 50-day SMA from above. If that happens on a daily closing basis, it will validate the bearish crossover.
Gold buyers need a daily candlestick closing above the 50-day SMA at $2,660 to unleash additional recovery toward the 21-day SMA at $2,680.
The $2,700 threshold will be the next significant target for buyers.
Conversely, failure to find acceptance above the 50-day SMA at $2,660 on a daily closing basis could reinforce sellers toward the $2,600 threshold.
Tuesday’s low of $2,610 will be tested ahead of that.
Fundamental Overview
Gold price buyers appear unstoppable
Gold price extends its recovery mode into a fourth straight session early Thursday, helped by a modest pullback in the US Dollar (USD) and the US Treasury bond yields.
The USD rallied hard on Wednesday, tracking the sharp gains in the US bond yields as traders reinforced the Trump trades optimism, digesting hawkish Fed commentary and poor 20-year bond auction results.
Most of the Fed officials who spoke on Wednesday sound a bit hawkish, prompting markets scale back their expectations of a 25 basis points (bps) interest rate cut in December.
Fed Governor Michelle Bowman said that “the US central bank should pursue a cautious approach on monetary policy.” She was the most hawkish of the lot. Fed Governor Lisa Cook noted that timing of further interest-rate cuts will depend on coming data, leaving the central bank’s decision at its December meeting uncertain.
However, Kansas Fed President Jeffrey Schmid said that “now is the time to dial back restrictiveness of policy. I see full employment, inflation trending lower and solid growth.” Boston Fed President Susan Collins also sounded dovish, saying that “some additional rate cuts are needed as the policy is still restrictive.”
Markets are now pricing in a 52% chance of 25 bps Dec Fed rate cut, the CME Group’s FedWatch Tool shows, down from about 83% seen a week ago.
Despite the hawkish shift in the Fed expectations and Trump trades optimism, Gold price stood tall and benefited from intensifying geopolitical tensions between Russia and Ukraine.
Russia, on Wednesday, staged “a massive information-psychological attack” against Ukraine by spreading a fake warning, purportedly from Ukrainian military intelligence, about an imminent mass air attack.
This response came in after Russia's Defence Ministry confirmed Tuesday that Ukraine fired six US-made Army Tactical Missile Systems (ATACMS) missiles at Bryansk region, just days after US President Joe Biden allowed the Ukrainian use of American-made weapons to strike inside Russia. The Kremlin also threatened a nuclear response to Ukranian’s non-nuclear attacks.
Amidst rife Russia-Ukraine conflict, Gold price is likely to stay supported but the upcoming Fed commentaries could reinforce sellers. Additionally, if risk-aversion hits the roof in the sessions ahead, the USD could regain traction on a flight to safety, capping the Gold price upside.
Traders remain nervous after the American AI giant Nvidia Corp.’s lackluster revenue forecast. Nvidia’s revenue rose 94% to $35.1 billion in the fiscal third quarter with the data centre unit, the biggest division, seeing its revenue double from a year earlier to $30.8 billion.
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: The stronger US Dollar keeps buyers at bay Premium
The corrective move in Gold (XAU/USD) remained well in place for yet another week, this time revisiting the $2,540 region per troy ounce, or a fresh two-month low, where some initial contention zone appears to have emerged.
Metals Big Picture
METALS BULLISH THEMES
METALS BEARISH THEMES
Latest XAU/USD Analysis
Editors' picks
EUR/USD struggles near 1.0550 amid dour mood
EUR/USD struggles near 1.0550 in the European morning on Thursday. The pair faces headwinds from risk-off flows due to rising geopolitical conflict between Russia and Ukraine and worries over the potential US tariffs on the EU. ECB- and Fedspeak are awaited.
GBP/USD trades around 1.2650, upside potential seems limited
GBP/USD keeps its range near 1.2650 in early European trading on Thursday. The pair's sidetrend could be attributed to the softer US Dollar and a risk-aversion market environment. Traders stay cautious amid rife geopolitical tensions and a light economic calendar. Fedspeak eyed.
USD/JPY trims losses to regain 155.00 amid BoJ rate hike uncertainty
USD/JPY is back above the 155.00 mark in the Asian session on Thursday, trimming early losses. The uncertainty about the timing of another rate hike by the BoJ supports the pair, despite a softer US Dollar and Treasury bond yields. Fedspeak is next on tap.
Gold needs acceptance above 2,660 to unleash additional recovery
Gold price is sitting at the highest level in over a week above the $2,650 barrier in the Asian trading hours on Thursday. All eyes remain on the speeches from several US Federal Reserve (Fed) policymakers and Russia and Ukraine geopolitical updates, in the absence of top-tier US economic data releases.
WTI steadies near $69.00 amid geopolitical risks, rise in US crude stock
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $68.95 on Thursday. The WTI price trades flat as small US crude oil inventories built last week offset the escalating war between major oil producers Russia and Ukraine.
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.
