Gold prices have experienced another significant plunge. Data from Wind reveals that on June 5th, the international gold price, as exemplified by the London spot price, fell below the key $4400 per ounce level, closing at $4328.92 per ounce, marking a daily decline of 3.25%. This sharp drop has narrowed the year-to-date gain for international gold to a mere 0.25%, effectively bringing the price back to levels seen at the end of 2025.
What Caused the Gold Price Drop?
Regarding the reasons behind this latest substantial decline, Yu Xiaoming, a senior investment advisor at Shaanxi Jufeng Investment, explained that the core trigger for the sharp drop on June 5th was the U.S. May non-farm payrolls data, which significantly exceeded expectations. This, coupled with upward revisions to previous data, demonstrated the robust performance of the U.S. job market. Consequently, the market strengthened its expectations that the Federal Reserve will maintain high interest rates or even restart rate hikes. This led to a rise in U.S. Treasury yields and a strengthening U.S. dollar, which increased the cost of holding gold. Combined with concentrated long position liquidations, these factors caused the gold price to plummet in response.
As mentioned, the U.S. Bureau of Labor Statistics released the May employment situation report on June 5th. The data showed that total non-farm payroll employment in the U.S. increased by 172,000 month-over-month. The U.S. unemployment rate for May held steady at 4.3%, having fluctuated within a narrow range of 4.3% to 4.5% since July 2025, indicating the resilience of the U.S. labor market exceeded market expectations.
Following the release of the stronger-than-expected U.S. jobs data, U.S. Treasury yields rose rapidly and the U.S. dollar strengthened in the short term. Wind data shows that by the close on June 5th, the U.S. Dollar Index had once again climbed above the 100-point threshold, with a year-to-date gain of 1.84%.
Song Xiangqing, Vice President of the China Society of Commercial Economy, analyzed that market expectations for Federal Reserve rate cuts have cooled while expectations for rate hikes have warmed. This has led to a surge in the 10-year Treasury yield and a simultaneous strengthening of the U.S. dollar. As a non-yielding asset, the opportunity cost of holding gold has increased sharply, triggering a large-scale withdrawal of funds. The convergence of these multiple negative factors resulted in a severe single-day decline in the gold price.
Outlook for Gold Prices
Many institutions have issued their latest forecasts for the subsequent trajectory of gold prices. For instance, Commerzbank has revised its year-end 2026 gold price forecast down to $4800 per ounce from a previous estimate of $5000 per ounce, while maintaining its price forecast of $5200 per ounce for the end of 2027. Previously, Morgan Stanley also significantly lowered its gold price expectations, reducing its target price for the second half of 2026 to $5200 per ounce. However, Goldman Sachs remains optimistic about gold, maintaining a target price of $5400 per ounce for the end of 2026.
Yu Xiaoming believes that in the short term, the performance of gold prices may be generally weak, primarily characterized by consolidation and bottom-building. Any rebounds are likely to be corrective in nature, and investors should avoid blindly trying to catch the bottom. From a medium-term perspective, as expectations for subsequent Federal Reserve rate cuts increase, coupled with ongoing support from global central bank purchases, gold prices are expected to gradually recover. For investors, in terms of operations, it is advisable to set strict stop-losses for short-term trades. For medium-term positions, one could consider building positions in batches during price dips. Simultaneously, it is crucial to closely monitor U.S. employment, inflation data, and Federal Reserve policy动向, remaining alert to market risks arising from data volatility.
Song Xiangqing anticipates that in the short term (6 to 8 months), gold prices are highly likely to experience wide fluctuations within a range of $4200 to $4700 per ounce as they consolidate and build a bottom, making a sustained one-way sharp decline or significant rally unlikely.
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