Gold, Silver Prices Jump Up To 2% On MCX As Weak US Jobs Data Cools Fed Rate Hike Expectations

Gold and silver traded firmly higher on July 3, tracking gains in global bullion markets.

At their intraday highs, MCX gold August futures rose by Rs 2,288, or 1.57 per cent, to Rs 1,48,046 per 10 grams. MCX silver September futures gained by Rs 4,912, or 2.10 per cent, to Rs 2,38,216 per kg.

The rally came after both contracts ended the previous session with marginal losses.

The gains in precious metals came after a weaker-than-expected US labour market report, which strengthened the view that the US Federal Reserve may not need to tighten monetary policy as aggressively as markets had anticipated.

According to data released by the US Bureau of Labor Statistics, the US economy added 57,000 nonfarm jobs in June, much lower than economists' expectations of 115,000. Earlier this week, ADP data also showed that private sector hiring slowed more than expected.

Following the data, traders reduced their expectations of another Fed rate hike. The CME FedWatch Tool now indicates around a 54 per cent probability of a September rate hike, down from about 66 per cent before the payroll numbers were released.

Lower interest rate expectations tend to support gold because the metal does not offer any interest income. When rates are expected to remain lower, the opportunity cost of holding gold declines, making it more attractive to investors.

Analysts believe the recent rally could extend over the coming months, although its pace will depend on incoming US economic data and the Fed's policy outlook.

Prathamesh Mallya, deputy vice president - research, non-agri commodities and currencies at Angel One, said the softer jobs data has reduced the likelihood of further monetary tightening by the Fed, creating a favourable backdrop for gold. However, he added that inflation data, Fed commentary, central bank gold purchases, geopolitical developments, energy prices and US Treasury yields will continue to shape the metal's direction.

Mallya expects the medium-term outlook to remain positive and said any correction could provide an opportunity for investors to accumulate.

Global Gold Prices Advance

The positive sentiment was visible across international bullion markets as well.

Spot gold rose 1.4 per cent to USD 4,179.94 an ounce, its highest level since June 23. US gold futures for August delivery gained 1.6 per cent to USD 4,193.20 an ounce.

Among other precious metals, spot silver climbed 2.3 per cent to USD 62.43 an ounce, while platinum and palladium also traded higher.

The dollar index weakened during the week, making dollar-priced gold less expensive for overseas buyers and providing another tailwind to bullion prices.

Kaynat Chainwala, assistant vice president - commodity research at Kotak Securities, said, "This combination, softer near-term hike risk alongside a weaker dollar, is supportive for gold and silver, even as the longer-term rate trajectory remains comparatively hawkish." However, she cautioned that the latest move reflects a repricing of near-term rate expectations rather than a complete shift in the Fed's policy stance.

She added that markets will closely track the upcoming FOMC meeting minutes, US inflation readings and the Fed's July policy decision, all of which could reshape expectations and keep bullion prices volatile.

"Any of these releases has the potential to prompt a recalibration of current expectations, and price action is likely to remain two-way and volatile rather than trending in a single direction until more clarity emerges," Chainwala said.

Weekly Gain Back On Track

The latest rally has also put gold on course for its first weekly gain in five weeks.

Investor sentiment has improved after a series of softer US economic indicators eased concerns that inflation would keep interest rates higher for longer. At the same time, unresolved differences in indirect US-Iran talks have continued to support some safe-haven demand for precious metals.

With US markets closed for the Independence Day holiday, trading volumes are expected to remain relatively thin through the day, which could keep price movements volatile.