Preparing for THE Bottom: Part 3 - Gold to Silver Ratio
Gold stages a rebound and trades above $2,400 on Tuesday after closing the fourth consecutive trading day in negative territory on Monday. The pullback seen in US Treasury bond yields help XAU/USD cling to modest daily gains despite the US Dollar's resilience.
The daily chart for the XAU/USD pair shows it is bouncing from the 50% Fibonacci retracement of the $2,293.54/$2,483.68 rally at $2,389.30. At the same time, a bullish 20 Simple Moving Average (SMA) heads higher just below the mentioned Fibonacci level, while the longer ones also advance below the longer ones, in line with the dominant bullish trend. Finally, the Momentum indicator maintains its downward slope within positive levels, while the Relative Strength Index (RSI) has turned marginally higher at around 54, supporting another leg higher.
In the near term, and according to the 4-hour chart, an upward extension seems limited. XAU/USD topped around the 38.2% retracement of the mentioned rally, providing statict resistance at $2,411.25. Furthermore, a bearish 20 SMA converges with the Fibonacci level, reinforcing it. Meanwhile, the Momentum indicator aims north at around its 100 line, while the RSI indicator remains directionless at 42.
Support levels: 2,389.30 2,377.10 2,364.00
Resistance levels: 2,411.25 2,425.70 2,439.90
Spot Gold recovered on Tuesday, changing hands at $2,403 a troy ounce. XAU/USD bounced from a weekly low of $2,383.78 posted on Monday as demand for the US Dollar receded ahead of United States (US) first-tier data and key earnings reports. Nevertheless, market participants are increasing their bets that the Federal Reserve (Fed) will deliver a 25 basis point (bps) interest rate cut in September and a similar one in December, also limiting the USD bullish potential.
Finally, easing government bond yields undermines demand for the Greenback. The 10-year Treasury note currently offers 4.23%, while the 2-year note yields 4.49%, down roughly 3 bps each.
A scarce macroeconomic calendar and upcoming US first-tier events further exacerbate the lack of clear directional strength. Investors are waiting for the preliminary estimate of the Q2 Gross Domestic Product (GDP) to be out on Friday, alongside revisions for the Personal Consumption Expenditures (PCE) Price Index in the same period, the Fed’s favourite inflation gauge. Furthermore, the country will release the June PCE inflation data on Friday, which will have a lesser impact than usual but will still affect the USD.
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:
After ending the previous week in positive territory, Gold (XAU/USD) gathered further bullish momentum and reached a new record-high of $2,483.75 on Tuesday.
EUR/USD stays under bearish pressure and trades deep in negative territory near 1.0850 on Tuesday. The US Dollar benefits from safe haven flows and weighs on the pair as investors adopt a cautious stance ahead of this week's key earnings reports and data releases.
GBP/USD is on the defensive toward 1.2900, struggling to find a foothold on Tuesday. The US Dollar holds steady following Monday's pullback amid a negative shift seen in risk sentiment, not allowing the pair to regain its traction.
USD/JPY weakens to 156.00 as BoJ rate-cut bets surge. The BoJ is expected to raise interest rates further by 10 bps as inflation remains above 2%. Investors await the US data for fresh guidance on interest rates.
Gold stages a rebound and trades above $2,400 on Tuesday after closing the fourth consecutive trading day in negative territory on Monday. The pullback seen in US Treasury bond yields help XAU/USD cling to modest daily gains despite the US Dollar's resilience.
West Texas Intermediate, the US crude oil benchmark, is trading around $79.00 on Tuesday. WTI price edges lower to near lowest level in over a month amid oil demand concerns and rising stockpiles.
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: