<p>The rise of gold and silver: the dollar weakens, and expectations for the Fed's interest rate fall</p>

On Monday, precious metals markets continued their confident recovery. Gold rose by 0.35%, reaching $4,170, while silver gained 0.23%, settling at $63. The key driver of this growth was the weakening of the U.S. dollar, which remains at two-week lows, along with a decline in investor expectations for further interest rate hikes by the Federal Reserve (Fed) this year.

The main catalyst for the shift in market sentiment was weak U.S. labor market data for June. The economy added only 57,000 jobs—almost half the forecasted 113,000. Moreover, estimates for April and May were revised downward by 74,000. The unemployment rate, however, fell to 4.2%. This data dramatically changed market expectations regarding monetary policy.

The U.S. Dollar Index (DXY) remains below the 101 mark after its sharpest weekly drop since April. The currency market clearly responded to the weakening economic indicators.

Revision of Rate Expectations: What the Numbers Show

The CME Group's FedWatch tool records a significant decrease in the probability of a rate hike. The likelihood of a policy tightening at the July meeting fell to 21.9% from 29.9% a week earlier. Meanwhile, the probability of keeping the rate at its current level rose to 78.1%.

A similar trend is observed in September contracts. The combined probability of at least one rate hike decreased to 53% compared to 59.4% last week. Expectations of two hikes fell from 12.6% to 8.7%.

At the same time, Fed Governor Kevin Warsh stated at the European Central Bank forum in Sintra that inflation risks have diminished and reaffirmed a commitment to price stability. This only strengthened market expectations of a pause in the rate hike cycle.

Now, traders' attention is focused on upcoming events: the Fed meeting minutes will be released this week, and fresh inflation statistics will be published on July 14. The further dynamics of precious metals will depend on this data.

My analysis: The current macroeconomic picture—a weak labor market and declining inflation expectations—creates an extremely favorable environment for gold and silver. If inflation data confirms a slowing trend, we could see a new surge in these assets. Investors should closely monitor the Fed minutes: any hints of an end to the tightening cycle will be a powerful catalyst.