Gold prices experienced a sharp decline of over 3% on Thursday, falling to their lowest level in nearly a week. Selling pressure intensified notably after the price dropped below the $5,000 per ounce mark. Analysts attributed the steep fall to multiple factors, including robust U.S. employment data reducing expectations for near-term interest rate cuts by the Federal Reserve, easing geopolitical tensions, investor profit-taking, a significant drop in U.S. equities, and selling by algorithmic traders.
Spot gold closed down $162.57, or 3.2%, at $4,921.77 per ounce.
FXStreet analyst Christian Borjon Valencia noted that strong U.S. jobless claims and non-farm payrolls data reinforced the Federal Reserve's stance of maintaining current interest rates, leading to the sell-off in gold. Furthermore, the resumption of nuclear talks between the U.S. and Iran, alongside potential progress toward a peace agreement between Russia and Ukraine, put additional pressure on gold prices due to reduced geopolitical risk.
Fawad Razaqzada, a market analyst at City Index and FOREX.com, commented, "Following increased market volatility, many investors placed stop-loss orders just below $5,000 or above $5,100 to protect their positions. As prices fell, these stops were triggered below $5,000, creating a cascade effect that caused a rapid decline in a short period."
Strong employment figures have diminished hopes for imminent Federal Reserve rate cuts. Data released on Wednesday showed the U.S. job market started 2026 more robustly than anticipated, reinforcing the view that policymakers may keep interest rates higher for longer. According to the U.S. Labor Department, non-farm payrolls increased by 130,000 in January, significantly surpassing the market expectation of 66,000. The unemployment rate also fell to 4.3% from 4.4% in December 2025. Additionally, data on Thursday showed initial jobless claims dropped to 227,000 for the week ending February 7. A strong labor market bolsters the Fed's confidence in the economy, supporting maintaining higher rates to ensure inflation continues to ease. Gold, which does not yield interest, typically faces headwinds in a higher-rate environment.
A broad sell-off in financial markets, driven by concerns over artificial intelligence, also contributed to Thursday's decline in gold, with algorithmic trading appearing to amplify the downward move. Fears that AI could erode future corporate profits led to declines in major U.S. stock indices, triggering a pullback in risk assets. The S&P 500 index fell 1.6%, marking its third consecutive daily decline, with most large-cap stocks, including Apple, trading lower. The tech-heavy Nasdaq 100 index dropped 2%, its fifth session in the past ten with a daily loss of at least 1%.
Macro strategist Michael Ball suggested that while there was no single clear catalyst for the sharp drop, the sell-off was likely exacerbated by selling from Commodity Trading Advisors (CTAs) who use computer models to bet on price trends. Nicky Shiels, head of metals strategy at MKS PAMP SA, indicated that margin calls likely intensified the selling pressure, forcing some investors to liquidate commodity positions, including metals, to raise liquidity. "We are all a bit baffled. It happened so fast, it felt like a 'de-risking' action," Shiels said, adding that even safe-haven assets like gold can be sold by investors in need of liquidity during periods of extreme market stress.
Some of Thursday's selling may also have stemmed from profit-taking, as gold's recent rapid ascent was partly fueled by speculative buying. Ole Hansen, commodity strategist at Saxo Bank, noted, "For gold and silver, a significant portion of trading is still driven by sentiment and momentum. On days like this, they struggle."
Investors are now closely watching the U.S. Consumer Price Index (CPI) data for January, scheduled for release on Friday, for further clues on the Federal Reserve's policy outlook. Economists anticipate that both the headline and core inflation rates will ease year-on-year to 2.5%, from 2.7% and 2.6% respectively. Peter Grant, Vice President and Senior Metals Strategist at Zaner Metals, stated, "Market expectations are for headline CPI to slow to 2.5%, possibly even 2.4%. This could reignite expectations for rate cuts, which would be positive news for gold."
From a technical perspective, FXStreet's Christian Borjon Valencia noted that while the overall trend for gold remains upward, Thursday's price action is pushing the metal toward lower levels. The Relative Strength Index (RSI) indicates weakening buying momentum, suggesting sellers may overpower buyers and paving the way for further declines. Valencia suggested that a daily close below $4,900 could lead to a retreat toward levels under $4,800, with the next key support at the 50-day Simple Moving Average around $4,602. Conversely, he added that if buyers can reclaim the $5,000 level, price action for the remainder of the week could be confined to a range between $5,000 and $5,100.
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