Gold price (XAU/USD) declined to approximately $4,450 during the early Asian session on Thursday, as stronger-than-expected US jobs data reinforced market expectations for higher US interest rates this year [1]. The May ADP private payrolls and JOLTS job openings reports indicated a resilient US labor market, prompting traders to increase their bets that the Federal Reserve will maintain elevated rates for longer, thereby diminishing the appeal of non-yielding assets like gold [1].
Bart Melek of TD Securities commented that higher inflation expectations, driven by negative supply shocks, have pushed yields higher across the curve, kept the US Dollar firm, and led markets to begin pricing in a potential Fed rate hike in late 2026 [1]. According to the CME FedWatch Tool, markets are now pricing in nearly a 42% chance of a Fed rate hike in December [1]. The ongoing war in Iran is also impacting energy markets, pushing prices higher and contributing to inflationary pressures [1].
Looking ahead, market participants are awaiting the US employment report due on Friday. The Nonfarm Payrolls (NFP) are expected to show a gain of 85,000 jobs in May, with the Unemployment Rate projected to remain steady at 4.3% [1]. A weaker-than-expected outcome could weigh on the US Dollar and potentially support gold prices in the near term [1].
CONCLUSION
Gold prices have fallen sharply as strong US jobs data and inflation expectations drive bets for higher US interest rates. With markets pricing in a significant chance of a Fed rate hike in December, investor attention now turns to the upcoming US employment report, which could influence both the US Dollar and gold prices. The ongoing geopolitical tensions and inflationary pressures continue to shape market sentiment.