We demonstrate a magnetocaloric ferrofluid based on a gadolinium saturated liquid metal matrix, using a gallium-based liquid metal alloy as the solvent and suspension medium. The material is liquid at room temperature, while exhibiting spontaneous magnetization and a large magnetocaloric effect. The magnetic properties were attributed to the formation of gadolinium nanoparticles suspended within the liquid gallium alloy, which acts as a reaction solvent during the nanoparticle synthesis. High nanoparticle weight fractions exceeding 2% could be suspended within the liquid metal matrix. The liquid metal ferrofluid shows promise for magnetocaloric cooling due to its high thermal conductivity and its liquid nature. Magnetic and thermoanalytic characterizations reveal that the developed material remains liquid within the temperature window required for domestic refrigeration purposes, which enables future fluidic magnetocaloric devices. Additionally, the observed formation of nanometer-sized metallic particles within the supersaturated liquid metal solution has general implications for chemical synthesis and provides a new synthetic pathway toward metallic nanoparticles based on highly reactive rare earth metals.