Preparing for THE Bottom: Part 3 - Gold to Silver Ratio
Gold's correction from the record-high set earlier in the week deepens on Friday. With the US Dollar (USD) benefiting from safe-haven flows and the 10-year US yield holding steady above 4.2%, XAU/USD tests $2,400 and looks to post small weekly losses
Gold price slides further to near $2,410 in Friday’s European session. The precious metal weakens after failing to sustain above the crucial figure of $2,450. The near-term outlook of the Gold price remains firm as short-to-long-term Exponential Moving Averages (EMAs) are sloping higher.
The advancing trendline plotted from the February 14 low at $1,984.30 will be a major support for Gold bulls.
The 14-day Relative Strength Index (RSI) drops to 58.00, suggesting the upside momentum has stalled. However, the upside bias remains intact.
Gold price (XAU/USD) extends its losing streak for the third trading day, declining to near $2,410 in Friday’s European session. The precious metal faces profit-booking after rallying to fresh all-time highs above $2,480 on Tuesday. The yellow metal has also been weighed down by a decent recovery in the US Dollar (USD) and bond yields amid growing speculation that the Republican Party will be victorious in the United States (US) Presidential elections later this year.
The expectations for Donald Trump returning as US President increased after an assassination attack on him. Meanwhile, increasing prospects that US President Joe Biden could drop his re-election bid due to medical conditions have also fuelled chances of Trump having a victory in the Presidential elections. Trump is known for favoring protectionist trade policies, which improves the US Dollar’s appeal.
The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, bounces back to near 104.30. A higher US Dollar makes investment in Gold an expensive bet for investors. 10-year US Treasury yields jump to 4.21%. Higher yields on interest-bearing assets increase the opportunity cost of holding an investment in non-yielding assets, such as Gold.
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. Profit-taking and the US Dollar recovery on souring market mood, however, caused the yellow metal to correct sharply in the second half of the week.
EUR/USD stays on the back foot and trades below 1.0900 following Thursday's sharp decline. Dovish comments from European Central Bank officials and the risk-averse market atmosphere make it difficult for the pair to stage a rebound on Friday.
GBP/USD continues to push lower toward 1.2900 in the American session on Friday. Disappointing Retail Sales data from the UK, combined with the US Dollar (USD) recovery amid souring mood, causes the pair to stay under bearish pressure ahead of the weekend.
USD/JPY is easing below 157.50 in Asian trading on Friday, with the Japanese Yen gaining ground on warnings from the authorities. Broad US Dollar strength and higher US Treasury bond yields, however, keep the pair afloat ahead of Fedspeak.
Gold's correction from the record-high set earlier in the week deepens on Friday. With the US Dollar (USD) benefiting from safe-haven flows and the 10-year US yield holding steady above 4.2%, XAU/USD tests $2,400 and looks to post small weekly losses
WTI price loses ground as US Dollar holds ground due to improved yields. Crude Oil may limit its downside as traders expect the Fed to reduce rates in September. Fed Governor Christopher Waller stated that the US central bank is ‘getting closer’ to a rate cut.
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: