Gold markets experienced a significant downturn this week, pressured by a strengthening dollar and rising Treasury yields following robust employment data. Veteran strategists warn that the decline may not yet be over.
On Friday, gold futures plunged 3%, marking the largest single-day drop since March 26. For the week, they fell 4.9%, the biggest weekly decline since the week of March 20. On Monday, gold futures extended losses, at one point falling further before paring the decline to approximately 1%, settling at $4,321.80 per ounce.
Ed Yardeni, founder of Yardeni Research, noted in a report to clients on Sunday that gold had breached a key technical level on Friday—the 200-day moving average at $4,443.40. He identified the "next support level at $4,000."
Despite this, Ed Yardeni stated he has not abandoned his bullish stance on gold, maintaining a year-end target of $5,500 and a decade-end target of $10,000. Meanwhile, silver's decline was more severe, falling 2.4% to $67.41 per ounce on Monday after a sharp 6.5% drop on Friday, its largest single-day fall since May 15.
Strong Employment Data Shifts Rate Expectations
The immediate catalyst for this gold sell-off was the stronger-than-expected U.S. May employment report. The data, which exceeded forecasts, reinforced the market view that the resilient U.S. economy does not necessitate interest rate cuts.
As gold does not yield interest, rising rate environments typically pressure the asset. Boosted by the jobs data, the yield on the 2-year U.S. Treasury note jumped to 4.160% on Friday, a high not seen since February 24, 2025, and climbed further to 4.178% on Monday. Concurrently, the ICE U.S. Dollar Index hovered above 100 on Monday; if sustained through the close, it would mark its highest closing level since March 30.
Technical Deterioration and Positioning Risks
Beyond macroeconomic factors, technical vulnerability also exacerbated the sell-off. Ole Hansen, Head of Commodity Strategy at Saxo Bank, pointed out that recent investor inflows into the gold market involved a significant reduction in short positions alongside a notable build-up of new long positions.
This positioning structure made gold "increasingly vulnerable to a technical correction once key support levels gave way." Hansen noted that the current technical picture for gold has clearly deteriorated.
Long-Term Bullish View Remains Intact
Despite near-term pressure, Ed Yardeni has not altered his long-term optimistic outlook for gold. He believes that once the Iran conflict concludes, gold's upward trend should resume. He maintains his year-end target of $5,500 and decade-end target of $10,000.
It is worth noting that gold is down approximately 0.2% year-to-date, following a surge of over 70% in 2025. In Ed Yardeni's view, the current pullback is more of a short-term disturbance than a trend reversal. However, whether the $4,000 level holds will be a key focal point for the market in the near term.
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