Metals Rally Faces Critical Test as Inflation Data and Hormuz Tensions Loom

The metals market had a week of sharp reversals and new highs, driven by a single piece of disappointing American economic news that reset how traders were thinking about interest rates. On July's jobs report, the US economy shed 23,000 positions instead of adding the expected 80,000—and June's already-weak figure was revised down further, from 57,000 jobs to just 20,000. The unemployment rate ticked down to 4.1 percent, but only because fewer people were bothering to look for work. That miss was enough to shake the entire market's calculus about what the Federal Reserve would do next.

The dollar weakened sharply, slipping below 99.5 for the first time since mid-June. Treasury yields eased. Traders suddenly saw a 56 percent probability that the Fed would hold rates steady in September, up from 45 percent just a day before. Equities surged—the S&P 500, Dow, and Nasdaq all posted their strongest weekly gains since April. And precious metals, which had been grinding sideways for weeks, broke free.

Gold climbed to its highest point in seven weeks, topping $4,000 per ounce and finishing the week up more than 7 percent—its best weekly performance since January. Silver was even more dramatic, spiking above $65 per ounce intraday before settling back, but still closing with double-digit weekly gains. On India's MCX exchange, gold futures broke decisively above the Rs 1,46,000–1,48,069 per 10 grams resistance zone that had been capping the market for weeks. The technical picture turned bullish: the RSI moved above 60, and prices held above the Supertrend. Analysts saw immediate resistance at Rs 1,54,150, with the next major hurdle at Rs 1,55,600.

The move was reinforced by institutional money. Global gold ETFs recorded July inflows of 23.5 tonnes, reversing two straight months of outflows. Softer crude prices earlier in the week also helped, easing inflation worries that had been keeping some investors cautious. There was even a brief moment of optimism around a potential arrangement to reopen the Strait of Hormuz, which had been a persistent supply-disruption risk.

Base metals extended their own strong run, with copper leading the charge. COMEX copper touched a record high, and LME copper reached multi-month peaks as the physical market tightened dramatically. US tariff uncertainty was drawing metal out of London warehouses and into American storage, where the bulk of visible global stockpiles now sits. Then, mid-week, the Democratic Republic of Congo announced an export ban on copper concentrate, squeezing the market further. The premium for immediate delivery over three-month contracts stretched to its widest level of the year. Aluminium and zinc stayed supported by similarly tight physical balances, with zinc trading near its best levels in several years. The underlying supply story—falling LME stocks, ongoing disruption risk in the DRC and Chile, and a steepening backwardation curve—should keep a floor under prices into the coming week.

Oil, by contrast, had a volatile and ultimately disappointing week. Brent and WTI sold off sharply in the first half of the week as optimism built around a US-Iran arrangement to reopen Hormuz, dragging both benchmarks toward the high-$70s per barrel. But that optimism reversed when Iran's parliament began reviewing a draft bill that would bar US- and Israel-linked vessels from the strait and tie full reopening to the lifting of the US maritime blockade. Fresh reports of strikes near Qeshm Island and renewed Houthi activity kept the geopolitical risk map wide. Both benchmarks rebounded into Thursday and Friday, but the recovery wasn't enough to offset the early-week slide. Brent finished the week down 7 percent, marking a second straight weekly loss. The latest attack on an ADNOC vessel, even as Oman described the Hormuz negotiations as constructive, highlighted the disconnect between diplomatic signals and conditions on the water. Unless the talks lead to a sustained decline in attacks and a reliable restoration of tanker movements, the market is likely to remain cautious.

What happens next depends almost entirely on what the US inflation data shows. July's Consumer Price Index arrives on August 12, followed by the Producer Price Index on August 13 and retail sales on August 14. A softer CPI-PPI combination would strengthen rate-cut expectations and create further upside potential for bullion. A hotter-than-expected reading could trigger profit-taking and unwind the week's gains. The metals rally has momentum, but it is not yet secure.