Gold falls to four-week low after strong US NFP report

• Gold falls to multi-week low following better-than-expected US labor market data.
• The People’s Bank of China stops the 18-month Gold buying streak, putting downward pressure on the XAU/USD.
• US Treasury yields soar with the 10-year yield rising to 4.43%, strengthening the Dollar and pushing the price of Gold lower.
• Traders are watching US inflation data and the Fed’s policy meeting next week.

Gold prices plummeted to a four-week low after the US Bureau of Labor Statistics (BLS) revealed that the labor market remained strong and China halted its purchase of the gold metal. Therefore, with XAU/USD trading at $2,295, the non-yielding metal fell more than 3%.

The latest US Nonfarm Payrolls report for May revealed that the labor market added more people to the workforce, exceeding estimates. Despite that, the same report revealed an increase in the unemployment rate, while average hourly earnings saw a slight increase.

Following the data release, XAU/USD extended its decline, which began during the Asian session on Friday. News that the People’s Bank of China paused its 18-month bullion buying streak weighed on the precious metal.

“The PBoC’s holdings of the precious metal were stable at 72.80 million troy ounces in May,” according to MarketWatch.

So far, Gold has traveled from $2,387 to $2,304 and is about to fall below the $2,300 mark. Meanwhile, US Treasury yields are soaring, with the 10-year bond yield rising 14 basis points to 4.43%, supporting the Dollar.

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

Market participants are focused on next week’s US inflation data and the Federal Reserve (Fed) monetary policy meeting. The US Consumer Price Index (CPI) is expected to remain stable, but a re-acceleration could trigger further losses for the gold metal.

Daily movements and market drivers: Gold price is on the defensive after a strong US jobs report.

• The US Bureau of Labor Statistics reported that May Nonfarm Payrolls increased by 272,000, surpassing the forecast of 185,000 and April’s figure of 165,000.
• The unemployment rate jumped from 3.9% to 4%, while average hourly earnings rose 4.1% year-on-year, up from 4% previously.
• A stronger-than-expected US NFP report sparked speculation that the Fed will keep rates higher for longer.
• Following the data release, the CBOT December 2024 federal funds rate futures contract expects a reduction of 27 basis points (bps), down 12 bps from Thursday.
• The odds of a Fed rate cut in September dropped from 55% to 47%.

Technical analysis: Gold price plummets below $2,300

Gold prices pull back sharply and appear to form a head-and-shoulder chart pattern, which could lower the price of the yellow metal. Momentum has changed to bearish as the RSI pierces below the 50 midline, indicating that sellers are in charge.

Therefore, further weakness in Gold and sellers could push the spot price below $2,300. Once cleared, the next target would be the May 3 low of $2,277, followed by the March 21 high of $2,222. More losses lie below, with the buyers’ next line of defense around the $2,200 figure.

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