Gold Drops Nearly 3% as Strong Jobs Data Fuels Rate Hike Fears

CNBC reported Friday that gold rate hike fears intensified after a blowout U.S. jobs report sent bullion tumbling below the $4,400-per-ounce level, putting the metal on track for a steep weekly decline.

Gold Slides as Payrolls Smash Forecasts

Spot gold fell roughly 2.2% to around $4,375 per ounce by mid-morning in New York. U.S. gold futures for August delivery shed a similar amount, trading near $4,405.

The catalyst was a May nonfarm payrolls figure of 172,000 new jobs. That figure dwarfed a Reuters consensus forecast of just 85,000. April’s reading was also revised higher to 179,000 from an earlier estimate of 115,000.

The stronger labor picture sharply reduced any hope of near-term Federal Reserve rate cuts. According to the CME Group FedWatch tool, markets now price roughly a 68% probability of a December rate hike. That figure stood closer to 50% before the data dropped.

Background: War in the Middle East Weighs on Bullion

Gold has lost more than 16% since a U.S.-backed military conflict with Iran erupted in late February. The war has pushed oil prices sharply higher and stoked persistent inflation concerns across global markets.

That inflationary backdrop creates a paradox for gold, traditionally viewed as an inflation hedge. Higher rates raise the opportunity cost of holding non-yielding assets like bullion, ultimately pressuring prices downward.

U.S. Treasury yields jumped immediately after the payrolls release, compounding that dynamic and accelerating gold’s selloff.

Broader Precious Metals Hit Hard

Other metals suffered even steeper losses on the session. Spot silver tumbled nearly 6% to around $69.50 per ounce, while platinum shed 3% to roughly $1,842. Palladium declined approximately 1.6% to near $1,299.

All four precious metals were set for weekly losses as the dollar firmed and yield-sensitive assets broadly retreated.

TD Securities global head of commodity strategy Bart Melek told CNBC the payrolls beat made Fed easing essentially unthinkable given ongoing inflation pressures from the conflict. He noted the high cost of carry was becoming a meaningful headwind for gold specifically.

Demand signals from physical markets added little support. Indian gold buying was subdued this week, and premiums in China also eased, removing two potential cushions for the metal.

Brent crude, meanwhile, remained on course for a weekly gain as the Middle East conflict continued to underpin energy markets.

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