The precious metals market is showing steady growth amid the weakening of the US dollar. On Monday, gold and silver continued their upward movement, consolidating at previously reached levels. The US Dollar Index (DXY) is holding at two-week lows, creating favorable conditions for buying safe-haven assets.
As of the time of this analysis, gold rose by 0.35%, reaching $4,170 per ounce. Silver, in turn, increased by 0.23%, trading near $63 per ounce. The recovery of precious metals began after the release of weak US labor market data for June, which significantly changed investor expectations regarding the further monetary policy of the Federal Reserve System.
Why Fed rates are a key trigger for metals
Gold and silver do not generate interest income, so their attractiveness directly depends on the opportunity cost of money. When the market expects rate hikes, holding metals becomes less profitable. However, as soon as rate forecasts soften, precious metals receive a powerful boost for growth.
This is exactly what happened after the employment report was released. The US economy created only 57,000 jobs—almost half the forecasted 113,000. Additionally, data for April and May were revised downward by 74,000 positions. The unemployment rate unexpectedly fell to 4.2%, but the overall picture was weaker than expected.
The currency market reacted immediately. The Dollar Index (DXY) settled below the 101 mark, recording its sharpest weekly drop since April.
Revision of expectations: what the numbers show
According to the CME FedWatch tool, the probability of a rate hike at the July meeting decreased to 21.9%, down from 29.9% a week earlier. The probability of keeping the rate at its current level rose to 78.1%.
September futures also reflect a softening of expectations. The cumulative probability of at least one rate hike by September fell to 53%, compared to 59.4% last week. The probability of two hikes dropped from 12.6% to 8.7%.
Concurrently, Fed Chair Kevin Warsh spoke at the European Central Bank forum in Sintra, stating a reduction in inflation risks and reaffirming a commitment to price stability. This statement only reinforced the market's view that the tightening cycle is nearing its end.
This week, traders will be closely watching the release of the Fed meeting minutes, and on July 14, fresh inflation statistics will be published. The further dynamics of precious metals will depend on this data.
My expert view: The current configuration of macroeconomic data—a weak labor market and declining inflation expectations—creates an ideal environment for a continued rally in gold and silver. If the June CPI report confirms a slowdown in inflation, we could see a breakout of psychologically important levels and an acceleration of the upward trend. Investors should consider current corrections as opportunities to enter positions.