Gold Dips as Resilient Labor Market Triggers Rate-Cut Pullback

Precious metals faced downward pressure on Friday, with spot gold slipping below the $4,600 per ounce level amid a resurgence of dollar strength. The pullback marked a reversal from recent record peaks, as market participants reassessed expectations for Federal Reserve rate cuts in light of stronger-than-anticipated economic data.

Labor Market Strength Dampens Rate-Cut Bets

The catalyst for gold’s retreat came from U.S. jobless claims figures that surprised markets to the downside. Initial claims reached their lowest level since November, contradicting analyst forecasts and signaling continued robustness in the employment sector. This resilient labor market backdrop prompted traders to dial back their expectations for near-term interest rate reductions.

Spot gold declined 0.4 percent to settle at $4,599.74 per ounce, while U.S. gold futures posted matching losses, closing down 0.4 percent at $4,604.39. The modest percentage moves masked the significance of the breakout: gold’s breach below the psychologically important $4,600 level underscored shifting market sentiment.

Dollar Rally Gains Traction

The greenback extended its weekly gains as confidence in U.S. labor market health bolstered demand for the currency. A stronger dollar typically pressures gold prices, as the commodity becomes more expensive for international buyers. Comments from several Federal Reserve officials, emphasizing the importance of pausing rate cuts given current economic conditions, further supported dollar appreciation.

Trade Optimism and Policy Outlook

Developments beyond the metals complex also contributed to reduced safe-haven demand. De-escalating tensions between Iran and the United States eased flight-to-safety flows that typically benefit gold. Additionally, the U.S. and Taiwan finalized a trade agreement featuring tariff reductions—from 20 percent to 15 percent on Taiwanese goods—coupled with substantial commitments to domestic production. The arrangement includes $250 billion in new semiconductor, energy, and artificial intelligence manufacturing initiatives alongside $250 billion in credit guarantees.

Fed Rate-Cut Probability Shifts Lower

The probability of a Federal Reserve rate cut in June now stands at 62.5 percent according to the CME FedWatch Tool, reflecting the market’s recalibration following the employment data. Five regional Federal Reserve bank presidents signaled their preference for a pause in rate reductions at the next policy meeting, citing sustained labor market strength as justification for holding rates steady.

Market participants are closely monitoring U.S. industrial production data scheduled for later Friday, along with remarks from additional Fed officials, to gain clearer insights into the economic trajectory and inflation dynamics that will inform monetary policy decisions ahead.