Preparing for THE Bottom: Part 3 - Gold to Silver Ratio
Gold Forecast and News
Gold stable below $2,300 despite mounting fears
Gold stays under selling pressure and confronts the $2,300 region on Tuesday against the backdrop of the resumption of the bullish trend in the Greenback and the decent bounce in US yields prior to the interest rate decision by the Fed on Wednesday.
Latest XAU/USD News
XAU/USD Technical Overview
XAU/USD is technically bearish and seems poised to extend its slump after breaking below $2,326.50, a critical Fibonacci level, the 23.6% retracement of the $1,996.06/$2,431.43 rally. Technical readings in the daily chart favor another leg, south, as the Momentum indicator heads firmly south below its 100 line, as the Relative Strength Index (RSI) indicator turned lower almost vertically, currently piercing its midline. At the same time, the 20 Simple Moving Average (SMA) lost its bullish strength, now a few cents above the aforementioned Fibonacci resistance.
In the near term, and according to the 4-hour chart, the bearish case is more evident. XAU/USD slid below its 20 and 100 SMAs, with the shorter one gaining downward traction. Technical indicators, in the meantime, flirt with oversold readings with firm downward slopes in line with another leg south. The pair bottomed at $2,291.26 on April 23, the immediate support level, with a stronger one at $2,260.30, the 38.2% retracement of the aforementioned daily run.
Support levels: 2,291.20 2,276.50 2,260.30
Resistance levels: 2,310.50 2,326.50 2,341.05
Fundamental Overview
Spot Gold is under strong selling pressure on Tuesday, breaking through the $2,300 mark in the American session. XAU/USD eased throughout the day, accelerating its slump mid-European session amid a souring market mood. The slide accelerated after the release of the United States (US) t Q1 Employment Cost Index, which rose to 1.2% from the previous 0.9%, a sign of continued inflationary pressures. Furthermore, the Conference Board (CB) Consumer Confidence Index deteriorated for the third consecutive month in April, falling to 97.0 from a downwardly revised 103.1 in March.
The news exacerbated the dismal mood ahead of the Federal Reserve (Fed) monetary policy announcement sheduled for Wednesday. The central bank is widely anticipated to keep rates unchanged amid signs of continued inflationary pressures. The central bank is also expected to repeat rates, which will remain higher for longer and, overall, deliver a hawkish message.
Meanwhile, dismal US macroeconomic data spurred risk aversion, sending stocks into a selling spiral. Wall Street is closing April with sharp losses amid concerns about local growth and despite generally upbeat earnings reports in the current seasion.
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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EUR/USD looks depressed ahead of FOMC
EUR/USD followed the sour mood prevailing in the broader risk complex and plummeted to multi-session lows in the vicinity of 1.0670 in response to the data-driven rebound in the US Dollar prior to the Fed’s interest rate decision.
GBP/USD drops below 200-DMA, at cross-roads to resume downtrend
The Pound Sterling reverses its course against the US Dollar, after extending its gains past the 200-day moving average (DMA). However, data from the United States (US), showing that inflation could be picking up, as shown by the Employment Cost Index (ECI), bolstered the Greenback. Therefore, the GBP/USD trades at 1.2517 down by some 0.36%, after hitting a daily high of 1.2563.
USD/JPY recovers as traders buy the dip
USD/JPY rebounds after the heavy sell-off on Monday. US Dollar traders are buying the dip after possible intervention by the authorities pulled USD/JPY down. The interest rate differential between Japan and the US is likely to maintain a bullish pressure on the pair.
Gold stable below $2,300 despite mounting fears
Gold stays under selling pressure and confronts the $2,300 region on Tuesday against the backdrop of the resumption of the bullish trend in the Greenback and the decent bounce in US yields prior to the interest rate decision by the Fed on Wednesday.
WTI remains on the defensive below $82.50 amid Israel-Hamas peace talks, Fed rate cut expectations
Western Texas Intermediate, the US crude oil benchmark, is trading around $82.20 on Tuesday. The black gold edges lower as ceasefire talks between Israel and Hamas in Cairo alleviated the fear of a broader conflict in the Middle East.
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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.
