Gold price drops 3% on US jobs data beat

Gold again dropped below the $5,000-an-ounce level on Thursday as new US economic data firmed expectations that there won’t be a Federal Reserve rate cut soon.

Spot prices fell as much as 4% to $4,880 per ounce, before recovering some losses. By midday, it traded above $4,900 an ounce for an intraday loss of 3%. Silver, meanwhile, continued its volatile run with a near 10% decline.

Bullion zigzagged throughout the week as investors weighed rising geopolitical risks against the prospect of elevated interest rates, which would reduce the appeal of assets like precious metals.

The move down follows Wednesday’s release of US labour data that came in better than markets expected, reinforcing the view that policymakers may keep rates elevated for longer. Nonfarm payrolls rose by 130,000 jobs in January, following a downwardly revised 48,000 increase in December, while the unemployment rate edged down to 4.3%, new data showed.

‘Risk-out’ move

Some investors also took profits on gold and silver, which have risen 40% and 160% respectively over the past year, to cover losses in other asset classes.

“It all happened so quickly and feels like a ‘risk-out’ move,” said Nicky Shiels, head of metals strategy at MKS PAMP SA, in a note to Bloomberg. In times of extreme market stress, haven assets like gold will also be sold by investors in dire need of liquidity, she added.

Gold and silver’s ferocious run since 2024 accelerated last month, with momentum-driven buying helping the metals hitting successive highs. That came to an abrupt halt on January 29, with gold plunging the most in over a decade and silver tumbling the most on record.

“Due to previous heightened volatility, a lot of people would have placed their stops either below $5,000 or above the $5,100 level just to preserve their stop positions,” Fawad Razaqzada, market analyst at City Index and FOREX.com, told Reuters.

“Because of the downward move, those stops have been triggered below the $5,000 level, and that caused a cascading-like effect, causing prices to slump in a short period of time,” he added.

Inflation in focus

Investors now await the US inflation data due on Friday for more cues on the Fed’s monetary policy path.

“It looks like the expectation is that headline CPI is going to slow from 2.7% to 2.5%, perhaps as low as 2.4%. That may revive some rate cut bets, and that would probably be favourable for gold,” said Peter Grant, vice president and senior metals strategist at Zaner Metals.

Despite the historic selloff seen in January, gold remains up by 17% on the year. Many banks are projecting prices to reach $6,000 an ounce this year amid strong retail investments on top of continued central bank buying.

(With files from Bloomberg and Reuters)