Gold dives to recent monthly lows after powerful US jobs data

Gold falls to multi-week lows after US labor market data beat expectations.
The People’s Bank of China is halting its 18-month gold buying spree, putting downward pressure on the XAU/USD rate.
US Treasury yields are rising rapidly, with the 10-year bond yield reaching 4.43%, strengthening the dollar and lowering the price of gold.
Traders will pay close attention to US inflation data and next week’s Fed meeting.

Gold prices fell to a four-week low after the U.S. Bureau of Labor Statistics (BLS) revealed the labor market remained powerful and China halted purchases of the gold metal. Therefore, with XAU/USD trading at $2,295, the price of the unprofitable metal has fallen by more than 3%.

The latest U.S. nonfarm payrolls report for May revealed that the labor market added more people to the labor force, surprising estimates. Yet the same report revealed an raise in the unemployment rate, while average hourly earnings increased slightly.

After the data was published, the XAU/USD rate extended the decline that started during Friday’s Asian session. The news that the People’s Bank of China has suspended its 18-month bullion buying frenzy has had a negative impact on the precious metal.

According to MarketWatch, “PBOC precious metals holdings held steady at 72.80 million troy ounces in May.”

So far, the price of gold has increased from $2,387 to $2,304 and will soon fall below the $2,300 level. Meanwhile, U.S. Treasury yields are soaring, with the 10-year yield rising 14 basis points to 4.43%, which underpins the dollar.

DXY, an index of the U.S. dollar against six other currencies, rose 0.79% to 104.91.

Market participants are paying attention to next week’s US inflation data and the Federal Reserve (Fed) meeting. The US Consumer Price Index (CPI) is expected to remain stable, but a renewed acceleration could cause further losses for the gold metal.

Daily market movement summary: Gold price on the defensive after powerful US jobs report

The U.S. Bureau of Labor Statistics reported that nonfarm payrolls rose by 272,000 in May, topping the forecast of 185,000 and April’s figure of 165,000.
The unemployment rate increased from 3.9% to 4%, while average hourly earnings increased by 4.1% y/y, compared to the previous 4%.
The stronger-than-expected NFP report from the US sparked speculation that the Fed will keep rates at a higher level for a longer time.
Following the data release, the December 2024 CBOT Fed Funds futures contract is projected to ease by 27 basis points (bps), which is 12 basis points lower than Thursday.
The odds of a Fed rate cut in September were lowered from 55% to 47%.

Technical Analysis: Gold price drops below $2,300

Gold prices are falling sharply and seem to be forming a head and shoulders pattern that could drag down the price of the yellow metal. The momentum has changed bearishly due to the Relative Strength Index (RSI) breaking below the 50 midline, indicating that sellers are in control.

Therefore, further gold weakness and sellers could push the spot price below $2,300. After clearing, the next stop will be the May 3 low of $2,277, followed by the March 21 high of $2,222. Further losses lie below, and buyers’ next line of defense is around $2,200.

Conversely, if gold buyers push prices above $2,350, look for consolidation in the $2,350-2,380 area.