Gold, silver await July payrolls as Fed holds rates at 3.65%

Gold and silver trade cautiously as investors await Friday's July US nonfarm payrolls report after the Federal Reserve held its benchmark rate at 3.65%.

Analysts forecast a gain of 90,000 jobs in July, up from June's disappointing 57,000, with the unemployment rate expected to edge up to 4.3% from 4.2%, according to consensus estimates.

The Fed's 9-3 vote to hold rates came as US second-quarter GDP slowed to 1.5%, missing the 2.2% consensus, while core PCE prices rose 0.10% in June with annual PCE inflation at 3.70%. The 10-year Treasury yield has climbed to 4.75% from 4.53% in mid-July, and the dollar index has slipped to 99.79 from 101.30.

A stronger-than-expected jobs report could revive dollar support and pressure gold, while a second consecutive weak print would reinforce rate-cut expectations and lift precious metals. The ADP employment report on August 5 and ISM surveys on August 3 and 5 offer earlier signals.

July jobs report in focus

Friday's nonfarm payrolls report is the week's key release. Any reading above 100,000 could strengthen confidence in the labor market and reinforce bets on a September rate hike, while a second consecutive negative surprise would raise doubts about hiring momentum.

The ADP employment report on August 5 and initial jobless claims on August 6 offer earlier signals. ISM Manufacturing PMI on August 3 and ISM Services PMI on August 5 will provide a fuller picture of July's economic conditions.

Dollar index slips to 99.79

The dollar index has fallen from 101.30 to 99.79, while the 10-year Treasury yield has risen to 4.75% from 4.53% in mid-July — a divergence that suggests higher yields are not attracting new dollar buyers. GBP/USD climbed to $1.3483, up about 1% over the week, while USD/JPY reversed from 164.00 to 157.60 after joint US-Japan intervention.

The Fed's new leadership under Chair Kevin Warsh has adopted a "less is more" approach to forward guidance, leaving markets to interpret economic data independently. The three dissenting votes at the July meeting came from known hawks who favored a rate increase, according to Roger J Kerr, executive chairman at Barrington Treasury Services NZ Limited.

For gold and silver, the direction hinges on whether the jobs data shifts rate expectations. A weak report would strengthen the case for rate cuts, typically supporting precious metals as the dollar weakens. A strong report would strengthen the dollar and pressure gold prices.

The market's reaction to the Fed's July decision has already set the tone. After the 9-3 vote to hold rates, markets pared back expectations for further rate increases this year, according to exchange rate commentary. The dollar's slide from 101.30 to 99.79 on the Dixy index reflects that repricing, even as the 10-year Treasury yield climbed to 4.75%.

For traders, the key data points to watch are the ADP employment figure on August 5 and the ISM services reading the same day. A soft ADP print would likely reinforce the case for a dovish September, while a strong ISM services number could offset some of the dollar's recent weakness.

This article is for informational purposes only and does not constitute investment advice.