Gold prices fall below $2,300 due to job market uncertainty and China’s buying slowdown

Gold prices took a sharp nosedive below $2,300 an ounce, marking the steepest decline in nearly three years. The unexpected strength in a crucial US jobs report shattered hopes of an imminent reduction in borrowing costs by the Federal Reserve.

Following the release of the May employment report, which revealed job growth surpassing expectations and a surge in wages, Treasury yields and the dollar spiked. As a result, gold plummeted by as much as 3.7%, the most significant drop since August 2021, while silver also experienced a notable 7% decline. Base metals were not spared either, as they extended their downward trend.

Ole Hansen, the head of commodity strategy at Saxo Bank AS, noted that the robust jobs report dampened the excitement surrounding potential rate cuts. The report indicated persistent wage growth and strong employment figures, which could necessitate higher interest rates to curb inflation.

The uncertainty surrounding the Fed’s rate trajectory has kept gold trading within a narrow range after reaching a record high above $2,450 an ounce. Additionally, the halt in gold purchases by China’s central bank last month has added to the downward pressure on prices.

Despite China’s previous significant role in driving the gold rally, recent data showing a decline in the country’s gold purchases has raised concerns among investors. The pause in buying suggests that China may be hesitant to acquire gold at record-high prices, potentially impacting the precious metal’s market dynamics.

As gold prices continue to fluctuate amid shifting market dynamics, investors are closely monitoring developments in the global economy and central bank policies to gauge the future direction of the precious metal.