Gold (XAU/USD) prices collapsed during the North American session on Friday, dropping more than 3% to $4,336, after the latest US Nonfarm Payrolls (NFP) report for May significantly exceeded expectations, with a gain of 172,000 jobs compared to the forecasted 85,000. Figures for the last three months were also upwardly revised, underscoring the strength of the US labor market and increasing the likelihood of a Federal Reserve rate hike. The Unemployment Rate remained steady at 4.3%, reinforcing the case for a hawkish Fed stance [1].
The US Dollar Index (DXY) surged 0.59% to 100.01, rebounding from daily lows of 99.16, as traders priced in higher US interest rates. US Treasury yields also spiked, with the 10-year note yield rising nearly six basis points to 4.53%, further pressuring gold prices downward [1]. According to Prime Terminal data, money markets now assign a 67% probability to a Fed rate increase at the December meeting, while expectations are that rates will remain steady in June. Cleveland Fed's Beth Hammack commented that it is 'reasonable to keep rates steady for now, but if recent trends persist, it might soon be necessary to act against high inflation' [1].
On the technical front, gold broke below its 200-day Simple Moving Average (SMA) of $4,432, signaling a bearish shift. The Relative Strength Index (RSI) indicates that momentum remains bearish and is accelerating toward oversold territory, suggesting that sellers are gaining traction and the path of least resistance is downward. If XAU/USD falls below $4,300, the next support level would be tested [1].
Geopolitical tensions in the Middle East persist, with Iran backing Hezbollah's rejection of a US-proposed ceasefire and linking the end of the US-Iran conflict to the cessation of hostilities in Lebanon. Iranian Foreign Minister Abbas Araghchi stated that the Lebanon conflict would end with the withdrawal of Israeli forces from occupied territories [1].
Looking ahead, next week's US economic schedule includes key inflation data on both the consumer and producer sides, as well as jobless claims, which could further influence market expectations for Fed policy [1].
CONCLUSION
Gold suffered a sharp decline as robust US jobs data fueled expectations of higher interest rates and a stronger dollar, with technical indicators pointing to further downside risk. Market participants are now closely watching upcoming US inflation data and Fed communications for additional policy signals.