Weak U.S. Jobs Send Gold Higher and Lift TSX as CUSMA Uncertainty Returns

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A surprisingly weak U.S. employment report gave financial markets exactly the kind of bad news they were prepared to welcome. American employers added only 57,000 jobs in June, well below expectations, prompting investors to reduce bets on near-term Federal Reserve rate increases. Gold surged above US$4,100 an ounce, the U.S. dollar weakened, and Toronto’s resource-heavy stock market moved higher as mining shares rallied.

The relief was tempered by a separate source of uncertainty closer to home. Washington declined to renew CUSMA in its current form during the agreement’s first mandatory joint review. The pact remains fully active until 2036, but annual reviews and renewed bargaining over autos, metals and regional content rules have restored a familiar question for Canadian businesses: how much confidence can be placed in long-term access to the U.S. market?

The Payroll Number That Changed the Market’s Mood

The headline number landed with a thud. U.S. nonfarm payrolls increased by just 57,000 in June, roughly half the 110,000 gain economists polled by Reuters had expected. The disappointment became more significant when combined with revisions to earlier data. May’s increase was cut to 129,000 from 172,000, while April was revised to 148,000 from 179,000. Together, those two months contained 74,000 fewer jobs than previously reported.

That does not mean the American labour market suddenly collapsed. The June gain was still above the average monthly increase of 36,000 recorded over the previous 12 months. It did, however, challenge the idea that hiring remained strong enough to keep inflation pressure elevated and force the Federal Reserve to raise rates quickly. Traders had spent weeks worrying that resilient growth would produce tighter monetary policy. The jobs report shifted that concern in the opposite direction and gave stocks, bonds and precious metals room to respond.

A Lower Unemployment Rate Did Not Tell the Whole Story

At first glance, the unemployment rate appeared reassuring. It edged down to 4.2%, while the number of unemployed Americans was little changed at 7.1 million. Beneath that surface, however, the labour force participation rate fell by 0.3 percentage point to 61.5%. A smaller share of the population was working or actively seeking work, helping explain why unemployment could decline even as payroll growth weakened.

The industry details also showed an uneven economy. Professional and business services added 36,000 jobs, social assistance gained 25,000 and health care added 22,000. Leisure and hospitality, by contrast, lost 61,000 positions as seasonal hiring came in weaker than usual. Long-term unemployment remained another soft spot: 1.9 million people had been jobless for at least 27 weeks, up 286,000 from a year earlier. For markets, the combination was softer rather than disastrous—weak enough to reduce rate fears, but not yet weak enough to signal a broad recession.

Why Federal Reserve Expectations Shifted So Quickly

The Federal Reserve entered July with its target rate at 3.5% to 3.75% and inflation still central to its decisions. Strong employment data can encourage a central bank to keep borrowing costs high—or raise them—because rapid wage and demand growth may keep prices elevated. June’s hiring miss reduced that pressure. Traders lowered the estimated probability of a rate increase by September to about 51%, down from 66% before the report.

That change matters well beyond the bond market. Gold produces no interest income, so it tends to become more attractive when investors expect cash and government bonds to offer less additional yield. The dollar also fell about 0.7%, making U.S.-dollar-priced metals cheaper for buyers using other currencies. Still, the report did not settle the policy debate. Average hourly earnings rose 3.5% from a year earlier, and unemployment remained low. The Fed gained time, but upcoming inflation data will determine whether the softer jobs picture is enough to keep rates unchanged.

Gold Broke Back Above US$4,100

Gold reacted immediately to the new rate outlook. Spot prices climbed about 2.4% to US$4,126.97 an ounce during Thursday morning trading, while U.S. futures rose 1.4% to roughly US$4,139. Silver advanced about 4%, with platinum and palladium also gaining. The move showed how quickly expectations can shift when one major economic release changes the perceived path of interest rates and the dollar.

For investors, the rally was not simply a bet on economic weakness. Gold was benefiting from several forces at once: reduced expectations for monetary tightening, a softer U.S. currency and continued demand for assets viewed as stores of value during geopolitical or trade uncertainty. That distinction matters. A weak jobs report can initially support gold, but the metal’s direction will still depend on inflation, central-bank policy and global risk. If inflation remains stubborn, rate expectations could rise again. If growth continues cooling without a new inflation surge, the environment may remain more supportive for precious metals.

Central-Bank Buying Added a Deeper Tailwind

The jobs report provided the immediate spark, but gold already had a powerful structural buyer in the background. The World Gold Council reported that central banks added a net 41 tonnes to official reserves in May. That return to stronger buying suggested that monetary authorities continued to view gold as a useful reserve asset even after prices had reached historically elevated levels.

Central-bank demand matters because it is usually driven by longer-term considerations rather than a single economic report. Reserve managers may seek diversification, liquidity and protection against financial or geopolitical shocks. Their purchases do not prevent corrections, and they do not guarantee that gold will keep rising. They can, however, create a steadier source of demand beneath shorter-term trading. That helps explain why Thursday’s rally felt larger than a routine reaction to payroll data. Investors were adding a fresh interest-rate argument to an existing story built around official-sector buying, geopolitical tension and the desire to hold assets outside traditional currency and bond markets.

Why a Gold Rally Has Extra Power on the TSX

Toronto’s stock market is unusually sensitive to commodity moves. Materials represented 18.4% of the S&P/TSX Composite as of late May, making it the index’s second-largest sector behind financials. Major Canadian-listed miners such as Agnico Eagle, Barrick and Wheaton Precious Metals give domestic investors far more direct exposure to gold than is found in many large U.S. benchmarks.

That structure shaped Thursday’s trading. The S&P/TSX Global Gold Index rose about 2.5%, while the broader materials sector gained 1.7%. Those advances helped lift the composite index roughly 0.2% to 34,918.59 by 10:25 a.m. Eastern time. The gain was modest, but its source was clear: gold miners were doing the heavy lifting. This is a recurring feature of the Canadian market. When precious metals rise sharply, the TSX can outperform even if domestic economic news is mixed. When gold and base metals fall together, the same concentration can become a powerful drag.

Falling Oil Prices Kept the TSX Rally Contained

The TSX did not surge because another major Canadian sector was moving in the opposite direction. Brent crude fell about 1.1% to US$70.80 a barrel as concerns about supply disruptions eased. Energy represented 17.1% of the S&P/TSX Composite in late May, so weakness in oil producers can offset a strong day for mining shares.

The result was a market that looked healthier at the index level than it did underneath. Materials were rising, but energy was facing a less supportive commodity backdrop, while investors were still processing trade-policy risk. That explains why the composite’s advance remained near 0.2% despite gold’s jump of more than 2%. For Canadian investors, the session was a reminder that “the TSX rose” can conceal a sharp internal tug-of-war. The index is heavily influenced by banks, miners and energy producers, and those groups often respond to different economic signals. Thursday’s winner was gold; oil prevented that victory from becoming a broad market celebration.

CUSMA Was Not Cancelled—but Certainty Was Weakened

Washington’s decision created a dramatic headline, but the legal reality is more measured. The United States declined to renew CUSMA in its current form during the agreement’s first six-year joint review on July 1. That decision did not terminate duty-free trade overnight. CUSMA remains in force until 2036 and can still be renewed at any time for another 16-year term if Canada, the United States and Mexico agree.

The immediate economic risk is therefore uncertainty rather than expiration. Without a renewal, the three countries move into annual reviews while negotiations continue. Businesses considering factories, supplier contracts or cross-border expansion must now account for the possibility that rules could change. Canadian officials continue to support renewal and are seeking discussions on U.S. tariffs affecting steel, aluminum, autos and lumber. For a company planning investment over ten or twenty years, a trade agreement that remains legally active but politically unsettled is less reassuring than one backed by a fresh long-term extension.

Autos and Regional Content Rules Are the Central Fault Line

The auto industry sits near the centre of the dispute because North American vehicle production is built around deeply integrated supply chains. A component may cross the Canada-U.S. border several times before a finished vehicle reaches a dealership. Washington is seeking stricter regional rules of origin and has pushed for North American vehicles to contain 50% U.S. content, a proposal that would raise the combined regional-content threshold to 82%.

The debate is not limited to technical percentages. The United States has already imposed tariffs of 25% on Canadian and Mexican autos, 50% on metals and 10% on lumber, according to Reuters. Canada wants those sectoral barriers addressed, while automakers warn that forcing more production into one country could raise costs and make vehicles less affordable. More U.S.-Mexico negotiations are scheduled for the week of July 20, and Canadian businesses will be watching closely. A bilateral-first process could reshape bargaining power even though CUSMA remains a trilateral agreement.

The Bigger Risk Is Investment That Never Happens

Trade uncertainty rarely appears as one dramatic line in an economic report. It shows up when a manufacturer delays a plant, a supplier avoids new equipment or a company hires fewer workers because future market access is unclear. The Bank of Canada has warned that repeated annual CUSMA reviews could prolong uncertainty and weigh on production, investment and hiring. Its business survey also found that many firms expected negotiations to produce higher average tariff rates on Canadian exports.

The scale of the relationship explains the concern. Canada and the United States exchanged nearly C$3.5 billion in goods and services per day in 2025, while North American goods and services trade has increased substantially since CUSMA took effect. Markets will now track two calendars at once: U.S. inflation and labour data for clues about interest rates, and trade negotiations for clues about Canadian growth. The next U.S. consumer-price report is scheduled for July 14, further U.S.-Mexico trade talks are planned for the week of July 20, and the next American jobs report is due August 7. Each could quickly change the balance again.

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