Gold Surges Past $4,100 as Weak Jobs Data Crushes Fed Rate-Hike Bets: July 2026 Markets Recap

Payroll gains for the prior two months were revised lower by a total of 74,000, with May's gain revised down to 129,000 from an initially reported 172,000 .

The unemployment rate fell to 4.2%, its lowest in a year, but the decline was largely due to a shrinking labor force rather than strong hiring . The labor force participation rate dropped 0.3 percentage points to 61.5% — the lowest since March 2021 . About 720,000 people left the labor force in June .

Employment rose in professional and business services (+36,000), social assistance (+25,000), and health care (+22,000). Leisure and hospitality lost 61,000 jobs .

Impact on Federal Reserve Rate Expectations

The weak jobs report triggered a sharp repricing of Fed rate expectations. Markets interpreted the data as dramatically lowering the probability of a Fed rate hike in July 2026 . According to CNBC, interest rate futures on the CME FedWatch showed the probability of a rate hike collapsed after the release .

Investors had previously worried that excessive labor market strength might force the Fed to turn more hawkish, but the tepid report offered "relief for U.S. equities" . Markets now expected fewer rate hikes by March 2027 than before the report , with some analysts shifting to speculation about rate cuts later in 2026 .

Asset Performance in the First Week of July 2026

U.S. Stocks

Major U.S. indexes finished the holiday-shortened week mixed. The S&P 500 Index advanced 0.6% on July 2 alone, while the Nasdaq Composite and Dow Jones Industrial Average also advanced . However, the Russell 2000 and S&P MidCap 400 Indexes declined, indicating a rotation away from small-caps .

Within the S&P 500, communication services, financials, and consumer discretionary sectors posted strong gains for the week, while real estate, utilities, and energy shares finished lower . Heavyweight technology shares swung dramatically, including steep declines late in the week .

Gold

Gold was the standout winner. Spot gold surged from below $4,000 early in the week to reclaim the $4,100 level . On July 2, it rose 2.2% to $4,117.63 per ounce . By July 3, it climbed another 1.4% to $4,179.94 per ounce, hitting its highest since June 23 and on track for its first weekly gain in five weeks — ending its longest losing streak in eight years .

Contributing catalysts included the weak jobs data crushing Fed hike bets, a weaker U.S. dollar, lower oil prices easing inflation fears, and less aggressive Fed commentary .

Silver and Bitcoin

Silver rallied 4.6% on July 2 . Bitcoin also strengthened alongside gold on the dimming Fed hike odds .

U.S. Dollar and Bonds

The U.S. dollar fell as the jobs data weighed on the currency . Government bond yields fell as rate-hike expectations collapsed .

Contributing Factor: Asian Manufacturing Data (June 2026)

Signs of cooling in Asian factory activity reinforced the narrative of a slowing global economy:

• China: Factory activity returned to marginal growth in June, "by the slimmest of margins," struggling for momentum despite strong high-tech and AI-related exports . The official NBS Manufacturing PMI rose to 50.3, barely above the 50-point expansion threshold .
• Japan: Manufacturing PMI growth slowed to 54.8 in June from 54.5 in May, with cost pressures surging .
• South Korea: Factory activity expanded, supported by solid demand for chips .
• India: Manufacturing PMI slowed to 54.2 in June (from 55.0 in May), with export order growth at its slowest pace since March 2023 amid weak European sales .
• Regional summary: Factory output across Asia grew in June but at a "subdued pace" compared with earlier surges, with inflationary pressures showing signs of easing .
• Eurozone: Manufacturing PMI slipped to a four-month low of 51.4 but remained above 50 for a fifth month .

Alongside the U.S. labor force shrinkage, the Asian manufacturing softness added to a picture of moderating global economic momentum, which reinforced the market repricing away from Fed tightening .

Summary Table