Silver price forecast: gold/silver ratio points to more upside

January 02, 2024 01:02 PM AEDT | By Invezz

Silver price forecast: gold/silver ratio points to more upside — Image source: Invezz

China slowdown and Fed actions

Silver price reacted mildly to the recent economic data from China. According to the National Bureau of Statistics (NBS), the manufacturing and services PMIs remained below 50 in December. This is a sign that the country’s economy is not doing well as global demand remains under pressure.

A separate report by Caixin revealed that China’s manufacturing PMI came in at 50.8 in December, a small increase from 50.7 in November. That increase was a few points higher than the median estimate of 50.4.

Silver and other industrial metals tend to react significantly to China’s economic numbers. Besides, China is the biggest buyer of silver and other metals like copper, iron ore, and platinum.

Silver price is also waiting for the next manufacturing PMI numbers from the United States and European countries. Economists expect the data to show that the PMI remained below 50 in this period.

The other important data to watch will be the latest US Non-Farm Payrolls (NFP) data. Economists polled by Reuters expect the data to show that the economy added over 180k jobs in December while the unemployment remained at 3.7%.

These numbers are important because they will impact the next Federal Reserve decision. Economists are pricing in a 0.25% rate cut as soon as in its March meeting. In most periods, silver does well when the Fed is slashing interest rates.

Meanwhile, the gold/silver ratio has been stuck at 86, about 11% above the lowest point in 2023. A ratio of 80 and above is a sign that silver is due for a price increase since gold is more expensive.

Silver price forecast

XAG/USD chart by TradingView

The daily chart shows that the silver price has been relatively volatile in the past few months. It peaked at $25.90 in December and then pulled back to $22.50 in the same month. It has remained slightly below the first support of the Andrews Pitchfork tool and is at the 23.6% Fibonacci Retracement point.

Silver remains above the 50-day and 25-day Exponential Moving Averages (EMA). It has also formed an inverse head and shoulders pattern. Therefore, there is a likelihood that silver will have a bullish breakout in the coming weeks. If this happens, the next point to watch will be at $25.

The post Silver price forecast: gold/silver ratio points to more upside appeared first on Invezz

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