Silver price forecast as the gold/silver ratio crash continues

July 9, 2024

NEW YORK (July 9) Silver price continued its comeback on Monday as investors predicted the next Federal Reserve actions. It jumped to a high of $31.50, its highest level since June 7th. It has soared by almost 10% from its lowest point this month.

Federal Reserve rate cuts

Silver and gold continued rising on Monday as investors reflected on last week’s economic numbers. 

According to the Institute of Supply Management (ISM), the manufacturing and non-manufacturing PMI dropped below 50 in June, signaling that the two sectors are in a contraction zone.

A separate report by the Bureau of Labor Statistics (BLS) revealed that the labor market was slowing down. The economy created 202k jobs in June, beating the analysts estimate of 186k. 

However, other numbers sent a different picture as the unemployment rate rose to 4.1%, its highest level in months. Wage growth and labor participation rate came in lower than expected.

Therefore, there are high chance that the Federal Reserve will start cutting interest rates as soon as in its September meeting if inflation continues falling. In a note, analysts at Citigroup said that they expect that the bank will start cutting in September and continue for more months ahead. 

The next important catalyst for silver will be this week’s consumer inflation data. Economists polled by Reuters expect the data to show that the headline consumer price index rose from 0.0% in May to 0.1% in June. On a YoY basis, the figure is expected to slow from 3.3% to 3.1%. 

The core CPI, which excludes the volatile food and energy prices, is expected to remain steady at 0.2% MoM and 3.4% YoY). 

Silver price will also react to the upcoming statements by Federal Reserve officials like Jerome Powell and Raphael Bostic. In most cases, silver and gold do well when the Fed and other central banks are cutting interest rates.

Globally, the Bank of England (BoE) is expected to start cutting on August 1st while the European Central Bank (ECB), Bank of England (BoE) and the Swiss National Bank have started to cut rates.

Meanwhile, the gold/silver ratio has continued falling in the past few days. It has dropped for seven straight days and moved to its lowest point since June 7th. Altogether, the ratio has dropped by more than 17.4% from its highest point this year and is about to move to a bear market. 

The gold-to-silver ratio formed a death cross pattern in May, pointing to more downside in the coming weeks. This is an important ratio that measures the price of gold to that of silver. A drop in the ratio usually sends a signal that silver is becoming more valuable relative to gold.

Silver price forecast

silver topped at $32.50 on May 20th of this year and then bottomed at $28.55 on June 26th. It has now bounced back as buyers target the year-to-date high of $32.50.

The metal has constantly remained above the 50-day and 200-day Exponential Moving Averages (EMA), signaling that bulls are in control. Also, the Relative Strength Index (RSI) indicator has continued rising.

Therefore, this chart shows that silver price is in a strong bull run that could see it soar to the highest point this year. A break above the YTD high of $32.50 will point to more upside, with the next psychological level to watch being at $35. This view is in line with my last silver forecast.

Gold is also seeing bullish momentum as buyers target the key resistance point at $2,450, its highest point this year. It has also jumped by 20% from its lowest point this year.



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