Gold Surges on Fed Outlook Shift: Bullion Rockets Amid Easing Inflation Fears and Labor Market Slowdown

Gold Surges on Fed Outlook Shift: Bullion Rockets Amid Easing Inflation Fears and Labor Market Slowdown​

Spot gold advanced significantly as expectations regarding Federal Reserve rate hikes began to wane. Driven by softer US job numbers and a downturn in energy prices, investors have scaled back bets on monetary policy tightening—a factor that historically weighed down the non-yielding precious metal. Gold surged toward $4,200 an ounce, posting a strong 2.2% gain for the week.

Diminished Hike Expectations Drive Gold Rally​

The data released Thursday indicated a sharp slowdown in US hiring in June, suggesting ongoing challenges within the labor market despite prior signs of strength. Swap traders now price the likelihood of the Federal Reserve executing a quarter-point hike at less than 20%, a notable drop from the one-third probability observed earlier this week.

This shift in expectation is a major catalyst for bullion buyers. The reduction in anticipated Fed hikes likely prompted short-gold positions to be covered, simultaneously reducing the incentive for traders to liquidate long positions, thereby fueling gold’s rally over recent days.

Energy Price Slump Boosts Bullion Demand​

Oil prices, which had been a critical inflation driver following the US-Iran conflict, have experienced their largest quarterly slump since 2020. This trend is supported by recovered tanker flows through the Strait of Hormuz. Saudi Arabia and the United Arab Emirates are reportedly shipping crude from the Persian Gulf at rates nearing pre-war levels.

Bart Melek, global head of commodity strategy at TD Securities, noted that lower energy costs and softer job growth suggest that inflationary pressures are likely to ease in the coming months. This market dynamic contrasts sharply with prior periods where geopolitical tensions heavily influenced commodity pricing.

Outlook and Resistance Levels Set by Experts​

Despite the current rally, experts offer cautious guidance regarding gold's immediate trajectory. Melek from TD Securities believes that gold is likely to rally only toward resistance at $4,280 an ounce. He added that TD does not expect gold to reach its target of $5,300 until next year due to persistently lingering inflationary pressures.

In related market activity, spot gold advanced 1.3% to $4,176.94 an ounce as of 2:31 p.m. in New York. Silver also saw a strong showing, rising 2% to $62.42 an ounce after gaining 5% over the previous three sessions.

Political Tensions and Fed Oversight Come Under Scrutiny​

The rally has also been supported by ongoing political scrutiny directed at the Federal Reserve’s independence. President Donald Trump and his allies have renewed efforts to reshape the central bank following recent judicial actions concerning Governor Lisa Cook.

Officials familiar with the matter suggest that top officials and external allies are actively exploring avenues to remove members of the Fed’s Board of Governors in Washington. These repeated challenges by the Trump administration have previously supercharged bullion’s rally during the latter months of 2025, fueling the so-called debasement trade focused on inflation and rising debt burdens in developed economies.