Gold Finds Relief in Payrolls Data

PRECIOUS METALS

Gold: August gold contracts moved higher following June’s payroll data, which came in well-below expectations at just 57k vs. forecasts of 114k. The unemployment rate fell to 4.2% with the labor force participation rate dropping to 61.5%. The jobs print is consistent with the “low-hire, low-fire” regime, but the magnitude of the miss is notably deeper than expected. The services-driven pockets of resilience (professional services, social assistance, healthcare) delivered, but leisure & hospitality lost 61,000 jobs, a reversal from May’s +70,000 gain, which was partially inflated by World Cup staffing. Stripping out that reversal, the underlying labor market trend aligns more closely with the ~+36,000/month 12-month average pace. Elsewhere in the data April and May’s figures were revised lower by a combined 74k. Perhaps what the market was pricing over the last two months was significantly more robust than reality. Still, with no immediate signs of a downturn in the labor market, the Fed should still have the edge to focus on inflation.

Gold remains under pressure from dollar strength and recent moves in Treasury yields, with the 10-Year yield up 12bps this week to just under 4.50% (before payrolls data). The strength in the dollar and yields is coming from market expectations of a rate hike from the Fed by year-end. While this dynamic has been priced in recent weeks, fresh support comes amidst optimism over the US economy, furthering demand for dollars. Recent dynamics continue to show that gold is moderately correlated (negatively) with moves in the dollar and the 10-year TIPS yield. The failure for gold to hold recent gains highlights the current sentiment that macro factors are determining price direction. Markets are pricing around 29 bps of total tightening, a drop from 38 bps before the payrolls release.

Silver: July Silver is up 2.5% to $61.60.

BASE METALS

Copper: Copper prices moved higher following the US jobs data as the dollar fell and yields retreated. Benchmark three-month copper on the London Metal Exchange fell shed 0.6% to $13,223 before the US payrolls data, while COMEX copper prices reversed earlier losses to trade around 0.2% higher at $6.19 after the release. Recently weighing on the metal was the lack of an announcement by US officials to make a decision over potential tariffs on refined copper. The Trump administration had originally set a June 30 deadline to announce potential tariffs on the metal. Still, tariff risk is still present and should not be discounted.

On the support side for the broader metals complex is recent data out of China, which showed that the manufacturing sector expanded in June to complete its strongest quarter since 2020. The RatingDog China General Manufacturing PMI, compiled by S&P Global, eased to 51.7 in June from 51.8 in May but was above forecasts for a reading of 51.6. The average PMI reading for the second quarter was 51.9. Yao Yu, founder at RatingDog said “the manufacturing sector maintained a steady expansion in June, supported by sustained new order growth, easing cost pressures and improved labor market conditions.” This follows the official PMI survey from Tuesday, which saw the index rise to 50.3 in June from 50.0 in May, driven by demand for computer chips and AI products. Manufacturers surveyed remained optimistic about the year-ahead outlook, though confidence softened to its lowest since January.

Zinc: Zinc lost 1.5% to $3,446.

Aluminum: Aluminum was down 0.8% at $3,053. Aluminum prices hit their lowest level in four months as funds liquidated bullish positions as weaker risk appetite and indications that supply is recovering faster-than-expected following disruptions from the Iran war.

Tin: Tin gave up 0.5% to $51,385.

Lead: Lead dipped 0.1% to $1,864.

Nickel: Nickel fell 1% to $16,195.

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