Precious Metals Continue to Surge
Precious metals continued to surge on Friday, capping their best week since January. The odds now favor a year-end rally, though I still want to see further bullish confirmation for added assurance.
It’s time for a weekend precious metals update, and I’m happy to report that metals and miners have continued the surge that began on Wednesday, greatly increasing the chances that we just witnessed the end of the six-month correction and the start of the next leg higher in the bull market. That said, I am still watching for additional signs of confirmation to be extra certain, as I will show in today’s analysis.
The precious metals complex exploded higher over the past week, breaking out after a long period of quiet trading throughout July as several major catalysts provided the spark for the move. Those catalysts included the sharp decline in energy prices as the Trump administration seeks to wind down the war with Iran that began in late February, as well as three much weaker-than-expected U.S. labor reports that have greatly reduced the odds of Fed rate hikes in 2026.
Though the details are still being fleshed out and remain very much up in the air, the Trump administration has said that it is close to reaching a deal with Iran that would reopen the economically vital Strait of Hormuz. The deal may entail some measure of Iranian control over the strait, which would be a less-than-ideal outcome compared with what was originally hoped for, but it would at least avoid an even greater quagmire that could potentially drag on for years and result in far higher energy prices and inflation.
As a result of the rising odds of an off-ramp from the war, energy prices have fallen significantly over the past week, with WTI crude oil down approximately 11%, Brent crude down roughly 9%, RBOB gasoline down 6.5%, and heating oil/diesel down 7.5%.
The combination of falling energy prices and three weak U.S. jobs reports over the past week has caused the odds of a Fed rate hike in 2026 to plummet from a peak of 78% the prior week to just 55% now. That sharp decline in rate hike odds has given precious metals a major boost, as non-yielding assets are highly sensitive to changes in interest rate expectations.
On Tuesday, the June JOLTS report showed 7.36 million job openings, down from a revised 7.54 million in May, while Wednesday’s ADP report showed private employers added 44,000 jobs in July, falling short of expectations of 65,000. Friday completed the trifecta, with the July monthly jobs report showing a shocking loss of 23,000 jobs versus expectations for a gain of 83,000.
The next potentially big market mover to keep an eye on is Wednesday’s July Consumer Price Index (CPI) report, which is particularly important right now because the Fed is far more focused on inflation risks than employment as it determines whether to keep rates where they are or raise them at its remaining meetings this year, with the next meeting on September 16. The year-over-year headline CPI is expected to rise 3.4%, while the core CPI is expected to rise 2.5%, so any significant deviation from those expectations is likely to trigger a major move in the markets.
Now let’s take a look at where precious metals stand, starting with gold, which leads the overall complex.
Over the past week, COMEX gold futures surged $237 per ounce, or 5.70%, to close at $4,401.30, the highest level since gold fell below that mark in early June and its strongest weekly performance since January.
On Friday, gold spiked in response to the much weaker-than-expected U.S. July jobs report, extending the surge that began on Wednesday. Both days saw trading volume well above the recent average, adding further credence to the breakout and showing that big institutional investors are getting behind the move. To learn more about the importance of strong volume during breakouts, read my tutorial on the subject.
Gold is now deep into its $4,300 to $4,600 resistance zone, which formed over a nine-month period from the key highs and lows between October and June. That is a very encouraging sign, though I would like to see gold break fully above this zone for even greater confirmation of this bullish change in trend. Assuming that occurs, the odds of the next leg higher and a strong rally into year-end, not just for gold but for the entire precious metals complex, will increase significantly.