Huatai Securities has released a research report stating that the resilience of the U.S. economy, coupled with Middle East conflicts driving up price levels and inflation expectations, and the stronger-than-expected non-farm payrolls data, have led the market to price in a compressed space for Federal Reserve rate cuts and the potential start of a rate hike cycle. Under the expectation of tightening monetary policy, the nonferrous metals market continues to face downward pressure.
However, from a long-term perspective considering geopolitical instability and central bank gold purchases, the long-term inflection point for precious metals like gold has not yet arrived. It is advised to stay attentive to price fluctuations. The firm maintains a "Recommended" rating for the sector and suggests focusing on high-quality industry leaders such as Zijin Mining Group Co., Ltd. (SHA: 601899) and Shandong Gold Mining Co., Ltd. (SHA: 600547). Huatai Securities' main views are as follows:
Event Overview
On June 5, 2026, local time, the U.S. labor data for May was released. The data showed that U.S. non-farm payrolls increased significantly by 172,000 in May, far exceeding the market's previous expectation of 88,000. Meanwhile, the unemployment rate remained unchanged at 4.3%.
Strong U.S. Non-Farm Data Exerts Pressure on Metal Prices
On June 5, 2026, Eastern Time, the U.S. Bureau of Labor Statistics released the non-farm payrolls and unemployment rate data for May. Following a combined upward revision of 93,000 for March and April, May non-farm payrolls added 172,000, significantly surpassing the market expectation of 88,000 and marking the largest increase in over two years. Concurrently, the unemployment rate held steady at 4.3%.
Following the data release, Wall Street significantly adjusted its expectations for Federal Reserve rate cuts downward, while expectations for rate hikes notably increased. The probability of tighter monetary policy trades rose, leading to substantial volatility in capital markets.
On June 5, local time, the three major U.S. stock indices all closed lower: the Dow Jones Industrial Average fell 1.35%; the S&P 500 Index dropped 2.64%; and the Nasdaq Composite plunged 4.18%, marking its largest single-day decline since April 2025. U.S. Treasury yields and the U.S. Dollar Index surged strongly: the 10-year Treasury yield briefly rose to 4.55%, and the Dollar Index climbed above 100.
Precious metals suffered heavy losses. On June 5, local time, COMEX gold futures fell 3.35% to $4,353.90 per ounce, and COMEX silver futures dropped 8.08% to $68.00 per ounce.
Short-Term Rate Hike Expectations Priced In, Precious Metals May Remain Pressured
Looking specifically at the employment data, job gains were concentrated in sectors such as leisure, hospitality, and government: the leisure and hospitality sector led the May job gains, adding 70,000 positions, far above the average monthly increase of 14,000 over the past 12 months. Within this sector, food services and drinking places added 48,000 jobs. Local government employment ended its decline, adding 55,000 positions.
Considering the imminent opening of the FIFA World Cup across the U.S., Canada, and Mexico, the high employment momentum in these sectors might be a short-term factor. However, the market's expectation for tighter monetary policy trades driven by the employment data will undoubtedly continue to exert pressure on metal prices.
Faced with stronger-than-expected economic and employment data, inflation may become the Federal Reserve's primary concern, bringing rate hike expectations to the forefront and putting pressure on high-risk assets and metal prices.
Currently, the market is continuously digesting the impact of this data. However, the long-term defensive demand logic for gold against the backdrop of geopolitical maneuvering remains. Until the Federal Reserve's policy rate truly peaks and pivots, the metals market is expected to remain volatile.
Risk Factors
Persistent geopolitical conflicts; high inflation in the United States; the Federal Reserve initiating a rate hike cycle; recession risks in major overseas economies; data citation risks.
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