Labor Market Data Dampens Rate Cut Prospects
Friday’s U.S. Nonfarm Payrolls report offered a nuanced picture of economic strength. The U.S. economy added 139,000 jobs in May—surpassing the 130,000 forecast—though down from April’s revised figure. The unemployment rate remained steady at 4.2%, while average hourly earnings increased by 3.9% year-over-year, surpassing expectations of 3.7%.
These indicators reaffirm the Fed’s cautious stance. With core inflation still above target, the odds of multiple rate cuts in 2025 have diminished. CME FedWatch data now indicates a 36% probability of a cut at the September meeting, down from 52% last week. Consequently, benchmark Treasury yields remained firm, weighing on non-interest-bearing assets, such as gold.
Weaker Dollar and Global Risks Offer Near-Term Support
Despite headwinds from rates and yields, Gold found modest support from a broadly softer U.S. Dollar. The Dollar Index (DXY) slipped below 104.2 on Monday, as concerns over the U.S. fiscal position and rising debt loads eroded investor confidence.
Meanwhile, geopolitical risks—particularly tensions in Eastern Europe and a lack of global diplomatic progress—continue to elevate demand for safe-haven assets. Silver, which benefits from both industrial and safe-haven demand, remains supported above key technical levels, buoyed by expectations of strong physical demand in Asia.
Investors now look ahead to U.S.-China trade negotiations, which could sway sentiment. While immediate Fed easing looks unlikely, macro and geopolitical uncertainty may help Gold and Silver retain a bid in the sessions ahead.
Short-Term Forecast
Gold remains under pressure below $3,343 as traders await signals from the Fed and trade talks. Silver remains bullish above $35.88, eyeing the $37.03 resistance level with momentum still favoring buyers.
