Gold prices hold sharp gains as soft US jobs data fuels Fed rate cut bets

Gold prices stabilized in Asian trading after a significant Friday rally, propelled by weak U.S. jobs data that reinforced expectations for a September Federal Reserve rate cut, now 90% priced in, and by increased safe-haven demand amid escalating trade tensions and a weaker dollar. Concurrently, U.S. copper futures remained under pressure, falling 0.7% following a 20% drop last week, as tariff exclusions led to record domestic stockpiles and a bearish outlook for global LME prices due to potential re-exports.

Analysis

A sharp divergence in commodity markets is being driven by macroeconomic data and trade policy shifts. Gold prices are holding firm near recent highs after a 2% rally, directly supported by a weakening U.S. economic outlook. The July nonfarm payrolls report, which showed a gain of only 73,000 jobs and an uptick in the unemployment rate to 4.2%, has cemented market expectations for a Federal Reserve interest rate cut in September, with the probability now priced at 90%. This has suppressed Treasury yields and weakened the U.S. Dollar Index, reducing the opportunity cost of holding non-yielding bullion and bolstering its appeal as a safe haven. This safe-haven demand is further amplified by President Trump's implementation of sweeping tariffs, which stokes global trade uncertainty. In stark contrast, U.S. copper futures remain under severe pressure, having plunged 20% last week after refined metal was excluded from a planned tariff. This policy change collapsed a key arbitrage trade, leading to a massive buildup of copper inventories in COMEX warehouses to a 21-year high. According to ING analysts, this domestic surplus is poised for re-export, creating a significant bearish headwind for global LME prices as supply is expected to increase.

Key Decisions for Investors

• Given the confluence of a dovish Fed outlook, driven by weak U.S. labor data, and persistent trade-related uncertainty, maintaining or initiating long positions in gold (GLD) appears strategically sound as a hedge against economic slowing.
• Extreme caution is warranted for U.S. copper (CPER), as the 21-year high in domestic stockpiles presents a strong bearish signal, with the potential for re-exports likely to depress both U.S. and global LME prices.
• The pronounced weakness in the U.S. Dollar (UUP) is a central macro theme, and investors should monitor its trajectory closely as it directly influences the pricing and attractiveness of commodities like gold.
• The clear divergence between safe-haven assets and industrial metals signals a risk-off sentiment; investors should consider prioritizing capital preservation and asset selectivity over broad market exposure.