Dollar Plummets to 2-Week Low on Employment Shock...Gold and Silver Rally on Rate Freeze Speculation

▲ Dollar (USD), Gold, Silver, Interest Rates/AI Generated Image

As the dollar fell to its lowest level in two weeks, gold and silver rose in tandem, with the receding prospect of interest rate hikes by the US Federal Reserve (Fed) once again shaking the precious metals market.

According to cryptocurrency specialized media BeInCrypto on July 6 (local time), gold traded up 0.35% at approximately $4,170, and silver rose 0.23% to approximately $63. Gold and silver continued their rebound that began after the US June employment figures fell short of market expectations.

New employment in the US economy in June amounted to only 57,000, half of the market forecast of 113,000. Employment gains in April and May were also revised down by a total of 74,000, and the unemployment rate fell to 4.2%. The US Dollar Index (DXY) remained at its lowest level in two weeks below 101 after recording its largest weekly decline since April.

According to CME FedWatch, the probability of a July rate hike decreased from 29.9% a week ago to 21.9%. The probability of a rate freeze increased to 78.1%. The cumulative probability of at least one rate hike by September also dropped from 59.4% to 53%, and the probability of two rate hikes decreased from 12.6% to 8.7%.

Kevin Warsh, a former Fed Governor, stated at the European Central Bank (ECB) forum in Sintra, Portugal, that “inflation risks have eased.” At the same time, he reaffirmed the commitment to price stability. The market is now turning its attention to the Fed's meeting minutes to be released this week and the June inflation data to be announced on July 14.

Gold and silver do not pay interest, making them sensitive to changes in interest rate expectations. As market expectations for interest rate hikes weakened, the relative attractiveness of holding cash decreased, and this, coupled with a weaker dollar, led to a continued rebound in gold and silver.

[Article Key Summary]

-As the dollar fell to its lowest level in two weeks, gold rose to approximately $4,170 and silver to approximately $63.

-The probability of a July rate hike decreased from 29.9% a week ago to 21.9%, while the probability of a rate freeze increased to 78.1%.

-Market attention is focused on the Fed's meeting minutes this week and the US June inflation data to be announced on July 14.

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