ADP miss and geopolitical easing fuel 4-day gold rally back above $4,300; silver jumps to 6-week high

On August 7, international precious metals continued their strong upward run. London spot gold surged in the afternoon, briefly hitting $4,299/oz, close to the $4,300 round level and a fresh high since late June; spot silver also jumped, with intraday gains expanding to 4% at one point to stand above $63.7/oz, also the highest since June 23. This was the fourth straight daily gain for gold. In the prior session (August 5), London spot gold soared 4.16% to $4,247/oz, while the main New York gold contract jumped 4.2% to settle at $4,308/oz — both posting their biggest one-day gains since February this year, sharply boosting the bull camp.

ADP miss cools rate-hike bets, igniting rally

The core trigger was far weaker-than-expected U.S. jobs data. U.S. July ADP private payrolls rose by just 44,000, well below the market expectation of 70,000, while June was revised down to 95,000 from 98,000 — the smallest increase since January. As the widely watched "small nonfarm," ADP data is often treated as an early gauge for the official payrolls report. Its notable weakness swiftly raised investor expectations of a cooling U.S. labor market, pushing down the probability of a Fed rate hike in September, while the dollar index and Treasury yields both tumbled.

For non-yielding assets like gold, rate expectations are among the most sensitive pricing variables. Cooling rate-hike expectations directly dragged the dollar and Treasury yields lower, providing strong valuation support for gold. Meanwhile, Fed officials struck a broadly dovish tone: some favored gradual rate increases but not aggressive hikes, and some said they would support hikes only if the disinflation trend failed to resume. Overall, no hawkish surprise emerged, adding fuel to bullish sentiment.

Weaker dollar and easing Hormuz tensions combine as tailwinds

Beyond rate expectations, a softer dollar was another major driver. Since July 28, the dollar index has kept falling, down over 1.7% in the past eight sessions and now hovering near six-week lows. On the yen side, a reported joint U.S.-Japan intervention involving selling nearly $60 billion in U.S. Treasuries also indirectly weighed on the dollar, making dollar-denominated gold more attractive to overseas buyers.

Geopolitically, marginal easing emerged. A temporary transit agreement between Iran and Oman to reopen the Strait of Hormuz is close to being reached, easing market worries about an escalation in the Middle East. International oil prices fell accordingly, reducing energy inflation pressure and further lowering the need for aggressive central bank rate hikes. Analysts noted that the Hormuz situation's impact on gold has shifted from a drag to a tailwind, clearing some obstacles for the precious metals rebound.

Silver shows greater elasticity; platinum and palladium diverge

Silver stood out in the broad precious metals rally. On August 5, London spot silver closed up 4.26% above $62/oz, and on August 7 it surged over 3% again to break above $63.7/oz, repeatedly hitting six-week highs. Silver has both safe-haven and industrial metal attributes, and with cooling rate-hike expectations, a weaker dollar and sustained growth in industrial demand such as photovoltaics, its price elasticity tends to exceed that of gold, and the gold/silver ratio has recovered somewhat.

By contrast, platinum group metals were relatively subdued. The main NYMEX platinum contract settled nearly flat at $1,746.9/oz, while the main palladium contract rose 1.37% to $1,369/oz. Earlier expectations of expanded U.S. tariffs on industrial products had already driven platinum and palladium to large gains, so after the news was priced in, short-term profit-taking pressure was strong and they failed to follow gold and silver higher. Fundamentally, platinum still has support from a global supply-demand deficit and strong downside resilience, while palladium remains pressured by the long-term shift to electric vehicles, with shrinking autocatalyst demand limiting its upside.

Central bank buying and institutional views: long-term logic intact

Over the medium and long term, the fundamental backdrop for gold demand remains solid. The latest World Gold Council report shows global gold demand reached 2,522 tons in H1, up 2% year on year, and a record $380 billion in value. In Q2, central banks bought a combined 288.9 tons, up more than 400% quarter on quarter and back to relatively high levels of the past four years. Although Q1 central bank buying slowed noticeably, the strong Q2 rebound shows central bank purchases remain the most solid floor for gold prices. Investment demand is expected to remain the main driver of gold demand growth in H2, increasingly supported by over-the-counter trading and Asian buying.

Institutions are broadly bullish on gold's outlook. CITIC Securities believes Fed policy may prove more dovish than expected, and surging U.S. military spending lifting fiscal deficits could send gold back into an uptrend within the year. Deutsche Bank said in its latest report that gold remains in the "explosive" phase that began in August 2024, with fair value near $4,700/oz by year-end. In A-shares, the precious metals sector turned broadly higher again on August 6: Shengda Resources rose over 7% and Western Gold gained 6%. Multiple mining firms that have issued H1 earnings forecasts posted net profit growth of over 40%, reflecting strong industry momentum as market sentiment and fundamentals resonate.

Outlook: nonfarm payrolls the key variable

Despite the strong rebound, investors should stay rational. Gold remains more than 20% below its late-January record high of $5,589/oz, with cumulative year-to-date losses of about 8.5%. To a large extent, this rally is a bear-market bounce and expectation repair. The next key focus is the U.S. July nonfarm payrolls report due on the evening of August 7. If jobs data continue to weaken, policy easing expectations will strengthen further, allowing gold to hold $4,300 and open upside room. Conversely, stronger-than-expected data could trigger a pullback of short-term gains, and the sustainability of the one-way move still needs confirmation.

It is also worth noting changes in the domestic physical gold market. The international gold surge on August 6 lifted domestic branded gold jewelry retail prices by nearly 60 yuan per gram in a single day, but mainstream brand足金 quotes still stood at 1,281-1,286 yuan/gram, down nearly 420 yuan/gram from the early-year peak of around 1,700 yuan/gram. Based on the traditional "three pieces of gold" weighing about 50 grams, current purchases cost about 21,000 yuan less than at the start of the year. Combined with expectations of a gold rebound, physical gold consumption and investment demand may recover further. For ordinary investors, chasing highs in the short term requires caution. It is advisable to watch the directional choice after the nonfarm data and manage positions and risk carefully.