Gold Price News: Gold Falls to One-Month Low on US Data

Gold prices fell sharply on Friday, dropping to their lowest since early May, after US figures showed an unexpectedly large increase in employment in May.

Prices fell as low as $2,306 an ounce on Friday, compared with around $2,377 an ounce in late trades on Thursday. The dramatic fall in prices followed a two-week high seen on Thursday.

US non-farm payrolls figures came out on Friday showing an increase of 272,000 in May, way more than the market’s expected 185,000. The jump in employment provided a surprisingly resilient view on the economy in May, casting some doubt on the need for interest rate cuts by the US Fed, at least in the short-term.

Gold prices were already under pressure early Friday on news reports stating that China’s central bank didn’t buy any gold for its official reserves in May, and the US jobs figures only added to the downward momentum.

Monetary policy came into sharper focus last week after the Bank of Canada and European Central Bank both cut interest rates by 25 basis points, in line with market expectations. The start of a loosening of monetary policy is supportive for precious metals prices in general, and this effect would be further strengthened if the US Fed shows signs of getting closer to cutting rates.

The markets generally expect the first US interest rate cut to come in the autumn, although bets are currently split between September and November, according to data from interest rate traders.

On the macro side, the start of the week is looking light on economic data releases, leaving the market to turn its attention to Wednesday’s US inflation figures for May, as well as the US Fed interest rate decision, with the markets widely expecting no change from the current 5.5% for now.