Preparing for THE Bottom: Part 3 - Gold to Silver Ratio
The Fed once again came to the rescue of the bulls, lifting gold price from around the key support around $1792 to take on the upside beyond the $1800 mark. So far this Thursday, gold price is extending the post-Fed rally towards the critical SMA200 one-day at $1821.
The Technical Confluences Detector shows that gold has recaptured critical resistance at $1815, which is the convergence of the Fibonacci 38.2% one-month, pivot point one-day R1 and Bollinger Band one-hour Upper. A firm break above the latter has opened gates towards $18211, the intersection of the SMA200 one-day and pivot point one-week R1.
If the buyers seize control above that barrier, then a test of the previous week’s high of $1825 could be in the offing. The next relevant upside target is envisioned at the Bollinger Band one-day Upper.
Gold refreshed daily lows heading into the North American session, albeit quickly recovered a bit thereafter. Currently hovering around the $1,800 mark, the XAU/USD struggled to capitalize on its modest intraday gains to the $1,807 area and was capped by a combination of factors. The US dollar was back in demand amid a goodish pickup in the US Treasury bond yields, which, in turn, acted as a headwind for the non-yielding yellow metal.
The USD uptick could further be attributed to some repositioning trade ahead of the highly-anticipated FOMC monetary policy decision, scheduled to be announced later during the US session. Market players will look for clues on the timing of tapering amid surging inflation in the US. This will play a key role in influencing the near-term trajectory for the greenback and provided a fresh directional impetus to the dollar-denominated commodity.
Meanwhile, investors remain worried about the potential economic fallout from the spread of the highly contagious Delta variant of the coronavirus. This, to a larger extent, helped offset the negative factors and helped limit any meaningful slide for the traditional safe-haven gold. Investors also seemed reluctant heading into the FOMC event risk, warranting some caution before placing any aggressive directional bets.
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 closed near the lower limit of the weekly channel. Additional losses are likely if XAU/USD breaks below the 100-day SMA. FOMC meeting and US Q2 GDP data highlight next week’s economic calendar.
EUR/USD is trading above 1.1850, as it continues to notch higher on Thursday. Dovish Fed downs the US Treasury yields alongside the US dollar. Rebound in Chinese stocks lifts overall market mood, weighing further on the safe-haven dollar. Eurozone data and US GDP in focus..........
GBP/USD picks up bids to refresh multi-day high above 1.3900. US dollar tracks Treasury yields to the south amid Fed’s dovish tilt. EU softens legal threat over NI protocol on demand of UK’s Frost. UK scraps quarantine rules for fully vaccinated EU, US travelers.
USD/JPY consolidates gains on Thursday in the initial trading session. Lower US Treasury yields undermine the demand for the US dollar. The yen remains unchanged after the BOJ summary of opinions suggests a longer accommodative monetary policy.
The Fed once again came to the rescue of the bulls, lifting gold price from around the key support around $1792 to take on the upside beyond the $1800 mark. So far this Thursday, gold price is extending the post-Fed rally towards the critical SMA200 one-day at $1821.
WTI oil prices seesaw around $72.00, down 0.15% intraday, during Thursday’s Asian session. The energy benchmark refreshed two-week top the previous day while posting a daily close beyond 21-DMA and 61.8% Fibonacci retracement (Fibo.) for the first time since July 14.
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."
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The main indicators that traders should watch to understand where gold is standing are: