Gold’s Dramatic U-Turn: Weak Jobs Data and Dovish Fed Signals Offset by Hormuz Blockade and Slashed Bank Targets

Gold climbs back to $4,080 after soft US labor data and Fed's dovish turn, but risks from Hormuz blockade and hawkish long-term outlook persist. Key jobs report awaited.

Gold has staged a remarkable recovery from its second-quarter rout, climbing back to around $4,080 an ounce. The yellow metal still carries a year-to-date loss of roughly 6%, but the rapid rebound has erased a chunk of the 26% decline from its January high. The catalyst? A sudden shift in the macro winds, courtesy of soft US labour data and a more conciliatory tone from the Federal Reserve.

Kevin Warsh, the Fed chair, used his appearance at the ECB forum in Sintra on Wednesday to signal that inflation risks in the US are cooling noticeably. Markets have responded by almost fully pricing out a July rate hike. The dovish turn was reinforced by the ADP payrolls report, which showed only 98,000 new private-sector jobs created in June, well short of analyst expectations. Gold shot higher on the news.

Yet the rally is treading on thin ice. The Fed’s long-term outlook remains hawkish. A majority of policymakers still expect rates to rise before the end of 2026, with some anticipating two increases. Meanwhile, the yield on 30-year US Treasuries is hovering near 5%, keeping the opportunity cost of holding non-yielding bullion painfully high. Commercial hedgers are positioned accordingly, with roughly 260,000 short contracts on the Comex – a defensive posture that underscores the lingering bearish sentiment.

Geopolitical factors add another layer of uncertainty. The Strait of Hormuz remains effectively closed to commercial traffic, now 123 days into the blockade. Only 34 vessels pass through daily, a far cry from the 100 transits before the conflict. Eight of the world’s largest container lines continue to reroute around the area, and mine risks keep traders on edge. If the waterway is not cleared by end of summer, some analysts warn gold could tumble back toward $3,500.

Wall Street has been marking down its price targets accordingly. Citigroup cut its three-month forecast to $4,000 and sees a drop to $3,500 if the Hormuz standoff persists. Goldman Sachs reduced its year-end 2026 target to $4,900, while J.P. Morgan trimmed its annual average estimate to $5,243 but kept a fourth-quarter view of $6,000. Deutsche Bank slashed its third-quarter projection by more than 22%, bringing it down to $4,300.

Despite the macro headwinds, physical demand is providing a floor. Central banks collectively bought 244 tonnes of gold in the first quarter, led by aggressive purchases from China. That institutional buying spree has helped absorb some of the selling pressure from the speculative side. On the flip side, India hiked import duties on gold from 6% to 15%, a move that could shave up to 60 tonnes off global demand. The World Gold Council still sees fair value around $4,100, and believes a geopolitical escalation could push prices above $4,500.

All eyes are now on the official US jobs report due later this week. Economists expect 114,000 new nonfarm payrolls and an unemployment rate of 4.3%. A miss on that consensus would provide fresh ammunition for rate cuts, potentially driving gold through the current technical resistance levels. For now, the metal is caught between the pull of dovish data and the drag of hawkish Fed expectations and a choked Gulf shipping lane.