Gold price tanks to four-week low on hot US NFP report

• Gold falls to multi-week low after US labor market data exceeds expectations.
• China’s People’s Bank halts 18-month Gold buying spree, exerts downward pressure on XAU/USD.
• US Treasury yields surge with the 10-year yield up to 4.43%, bolstering the Greenback and pushing Gold’s price lower.
• Traders eye US inflation data and Fed 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 golden metal. Therefore, with the XAU/USD trading at $2,295, the non-yielding metal dropped by more than 3%.

The latest US Nonfarm Payrolls report for May revealed the labor market added more people to the workforce, smashing estimates. Despite that, the same report revealed an uptick in the Unemployment Rate, while Average Hourly Earnings witnessed a slight increase.

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

“Holdings of the precious metal by the PBOC held steady at 72.80 million troy ounces for May,” according to MarketWatch.

So far, Gold has traveled from $2,387 to $2,304 and is about to fall beneath the $2,300 mark. In the meantime, US Treasury bond yields are skyrocketing, with the 10-year bond yield climbing 14 basis points to 4.43%, underpinning the Greenback.

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

Market participants turn to next week's US inflation data and the Federal Reserve’s (Fed) monetary policy meeting. The US Consumer Price Index (CPI) is expected to remain steady, but a reacceleration could trigger further losses for the golden metal.

Daily digest market movers: Gold price on the defensive after strong US jobs report

• US Bureau of Labor Statistics reported that May's 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 increased by 4.1% YoY, up from the previous 4%.
• A stronger-than-expected US NFP report sparked speculation that the Fed will keep rates higher for longer.
• After the data release, the December 2024 CBOT fed funds rate futures contract expects 27 basis points (bps) of easing, 12 bps less than on Thursday.
• Odds for a Fed rate cut in September were lowered from 55% to 47%.

Technical analysis: Gold price collapses below $2,300

Gold prices retreat sharply and appear to form a Head-and-Shoulders chart pattern, which could lower the price of the yellow metal. Momentum has shifted bearish due to the Relative Strength Index (RSI) piercing below the 50-midline, indicating that sellers are in charge.

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

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