Preparing for THE Bottom: Part 3 - Gold to Silver Ratio
Gold Forecast and News
Gold remains stuck near $2,300 ahead of US NFP
Gold price struggles to gain any meaningful traction and trades in a tight channel near $2,300. The Fed’s less hawkish outlook drags the USD to a multi-week low and lends support to XAU/USD ahead of the key US NFP data.
Latest XAU/USD News
XAU/USD Technical Overview
From a technical perspective, the daily chart shows sellers rejected advances for a second consecutive day around $2,326.50, the 23.6% Fibonacci retracement of the $1,996.06/$2,431.43 rally. The same chart shows the 20 Simple Moving Average (SMA) remains flat just above the mentioned level, while the longer ones maintain their upward slopes well below the current price. Finally, technical indicators held within negative levels with uneven strength, skewing the risk to the downside.
The 4-hour chart shows the pair is currently developing below bearish 20 and 100 SMAs, although a modestly bullish 200 SMA. Technical indicators recovered from their early lows but remain below their midlines and are losing their upward strength, suggesting buyers are not interested at the time being.
Support levels: 2,291.20 2,276.50 2,260.30
Resistance levels: 2,310.50 2,326.50 2,341.05
Fundamental Overview
Financial markets struggle for direction on Thursday, with XAU/USD hovering around the $2,300 mark. The US Dollar traded throughout the day on sentiment, advancing with optimism while falling when things soured. In a broader view, however, little has changed across the board throughout the week, as the Federal Reserve (Fed) failed to deliver a clear message. The central bank announced on Wednesday that it would slow the pace of decline in its securities holdings by reducing the monthly redemption cap on Treasury securities from $60 billion to $25 billion starting in June. Interest rates have been left unchanged, as expected.
The Fed was hawkish but not as hawkish as feared. Indeed, Chairman Jerome Powell dropped some dovish comments in the middle of his press conference. Inflation is still the main issue, but not the only one. Price pressures intensified in the first quarter of the year, while other macroeconomic data indicated economic progress slowed. Still, Powell repeated that decisions will be made meeting by meeting and clarified that it is unlikely the next policy move will be a hike. He added that cutting rates is an option if inflation resumes its fall but also if there is weakness in the labor market, uplifting the relevance of employment-related figures ahead of the next Fed decision.
Data released these days showed the labor market remains tight. The ADP survey indicated that the private sector added 192K new positions in April while the number of job openings remained little changed at 8.5 million on the last business day of March, according to the JOLTS Job Openings report. Furthermore, the US reported Unit Labor Costs in the first quarter of the year rose 4.7%, implying an upward risk to inflaiton, while Nonfarm Productivity in the same quarter advanced a measly 0.3%.
Another indicator of labor sector performance will be the April Nonfarm Payrolls report, which will be out on Friday. The US is expected to have added 243K, while the Unemployment Rate is foreseen steady at 3.8%. The report includes an update on wages, while separately, the US will release the April ISM Services PMI, an indicator of economic health.
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.
Metals Big Picture
METALS BULLISH THEMES
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Latest XAU/USD Analysis
Editors' picks
EUR/USD holds above 1.0700 ahead of US jobs report
EUR/USD stays in a consolidation phase above 1.0700 after closing the previous two days in positive territory. Investors eagerly await April jobs report from the US, which will include Nonfarm Payrolls and Unemployment Rate readings.
GBP/USD advances to 1.2550, all eyes on US NFP data
The GBP/USD pair trades on a stronger note around 1.2550 amid the softer US Dollar on Friday. Market participants refrain from taking large positions as focus shifts to April Nonfarm Payrolls and ISM Services PMI data from the US.
Japanese Yen stands tall near multi-week top as traders keenly await US jobs data
The Japanese Yen continues to draw support from speculated government intervention. The post-FOMC USD selling turns out to be another factor weighing on the USD/JPY pair. Investors now look forward to the crucial US NFP report for a fresh directional impetus.
Gold remains stuck near $2,300 ahead of US NFP
Gold price struggles to gain any meaningful traction and trades in a tight channel near $2,300. The Fed’s less hawkish outlook drags the USD to a multi-week low and lends support to XAU/USD ahead of the key US NFP data.
WTI holds above $79.00 ahead of US NFP data
Western Texas Intermediate, the US crude oil benchmark, is trading around $79.00 on Friday. The black gold rebounds modestly from a seven-week low. However, the upside might be limited due to rising crude inventories in the United States and fading hopes for rate cuts from the US Federal Reserve.
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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.
