Gold's Central Bank Safety Net Strains Under Jobs Data's Blow

Gold suffers worst weekly loss since March after blockbuster US payrolls report boosts Fed rate hike odds to 68-72%, with technical support at $4,319 and central bank buying still underpinning long-term outlook.

Gold suffered its steepest weekly retreat in months on Friday, as a blockbuster US payrolls report upended expectations for the Federal Reserve's monetary path and sent the precious metal slumping to $4,352.90 an ounce. The 172,000 new jobs added in May — double what economists had forecast — dealt a 3.3% single-day knockout to spot prices and pushed the weekly loss to 4.75%, the worst showing since the March selloff.

The data shifted the dovish calculus in the derivatives market. A rate hike by the Fed before the end of 2026 is now priced with 68-72% probability, up from roughly 50% a month ago. For gold, which pays no yield, the prospect of prolonged tightening erodes its appeal versus interest-bearing assets. The resulting margin call was even more acute for silver, which tumbled 7.8% on the day.

Technicians see little respite near term. The relative strength index has fallen to 34.4 — hovering just above the oversold threshold of 30, but not yet flashing a clear buy signal. The 200-day moving average has been breached, and the next line of defense sits at the year-end support corridor around $4,319. Should that level fail, the Saxo Bank's chart desk pegs $4,099 as the next downside objective, while some analysts warn that a test of the round $4,000 handle cannot be ruled out. On the upside, the zone from $4,493 to $4,540 forms immediate resistance, with a larger barrier stretching to $4,725.

The macroeconomic headwinds do not stop at the Fed's doorstep. Europe is adding its own weight: markets expect the European Central Bank to lift its key rate by 25 basis points to 2.25% on June 11, following Germany's consumer price inflation hitting 2.9% in April — the highest in more than two years. A separate liquidity drag could emerge from blockbuster equity offerings such as the anticipated SpaceX initial public offering and large-scale capital increases in the artificial-intelligence sector, both of which could siphon capital away from the precious metals complex.

Yet gold's support structure is far from hollow. Central banks continue to accumulate bullion at a steady clip. The People's Bank of China added nearly ten tonnes to its reserves in May, marking the 19th consecutive month of purchases and bringing total holdings to almost 75 million ounces. On a global scale, official-sector buying reached 244 tonnes in the first quarter of 2026 — a 3% year-on-year increase. Metals Focus projects an average gold price of $4,920 for the full year, underpinned by these institutional purchases and the mounting refinancing pressures on sovereign debt markets.

These fundamentals have repeatedly cushioned gold since 2022, but they have yet to counterbalance the immediate shock from the payrolls data. Retail demand, meanwhile, tells a different story: jewellery consumption in China slumped 31% and in India 19%, reflecting soaring local prices and economic caution.

The coming days offer a potential catalyst for a turnaround. Both the US consumer price index and producer price index are due for release this week. A benign inflation print could ease pressure on the Fed and allow gold to stage a technical bounce from the $4,319 support. A hotter reading, conversely, would reinforce the rate-hike narrative and likely extend the rout — a scenario that would sever gold from its all-time high of $5,626.80 reached in late January.