Preparing for THE Bottom: Part 3 - Gold to Silver Ratio
XAU/USD accelerated its recovery on Friday, as investors drop the USD. Dismal US employment-related figures revived hopes for a soon-to-come rate cut from the Fed.
The gold price trades on a positive note on the day. The yellow metal keeps the bullish vibe unchanged as it holds above the key 100-day Exponential Moving Average (EMA) on the daily timeframe.
In the near term, XAU/USD breaks above a descending trend channel that formed in mid-April, with the 14-day Relative Strength Index (RSI) standing in bullish territory around 67.50, which supports the buyers for the time being.
If gold bulls step in at the $2,400 psychological mark, then yellow metal could see a rally to an all-time high near $2,432, en route to the $2,500 figure. On the flip side, the first downside target will emerge at the resistance-turned-support level at $2,340. Extended losses for gold price expose XAU/USD to a potential support level at the $2,300 round mark, followed by a low of May 2 at $2,281.
Gold price (XAU/USD) gains momentum on Friday despite the modest rebound in US Dollar (USD). The yellow metal edges higher as many economists expect a weakening labor market could prompt the Federal Reserve (Fed) to cut interest rates sooner than currently expected to stimulate economic growth. Furthermore, the renewed geopolitical concerns are likely to be a positive factor for gold’s value on the market.
However, the hawkish US Fed talks on the interest rate, and the stronger US dollar (USD) might weigh on gold prices. Gold traders will keep an eye on the first reading of the US Michigan Consumer Sentiment Index for May, along with the speeches from the Fed’s Bowman, Goolsbee, and Barr. Next week, the US Consumer Price Index (CPI) report will be in the spotlight.
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.
Optimism continues to undermine demand for the American currency ahead of the weekly close. EUR/USD hovers around weekly highs just ahead of the 1.0900 figure.
Following BOE-inspired slump on Thursday, the British Pound changed course and trades around 1.2530. Better-than-anticipated UK GDP and a weaker USD behind the advance.
USD/JPY trades on a stronger note around 155.50 on Friday during the Asian trading hours. The renewed US Dollar demand lifts the pair. Nonetheless, the verbal intervention and the hawkish comment from the Bank of Japan’s Governor Kazuo Ueda might cap the downside of the Japanese Yen for the time being.
XAU/USD accelerated its recovery on Friday, as investors drop the USD. Dismal US employment-related figures revived hopes for a soon-to-come rate cut from the Fed.
Western Texas Intermediate, the US crude oil benchmark, is trading around $79.30 on Friday. The black gold edges higher amid optimism about rising demand in China and the US, the world's two biggest crude-consuming nations.
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: