Gold prices dropped below $4,370 per ounce on Friday, reaching their lowest level of 2026 and heading for a weekly decline of nearly 4%, as a stronger-than-expected US jobs report and ongoing Middle East uncertainty heightened inflation and interest rate concerns. The May nonfarm payroll report revealed the US economy added 172,000 jobs, significantly above the forecasted 85,000, while the unemployment rate held steady at 4.3% and annual wage growth moderated to 3.4%, in line with expectations. This prompted investors to increase bets on a Federal Reserve interest rate hike, with markets now pricing in a quarter-point increase by year-end.
The dollar index edged up to around 99.5 on Friday and remained on track for a weekly gain as a resilient labor market reinforced expectations that the Federal Reserve may need to keep policy tight or even consider further rate increases. The latest data showed the US economy added 172,000 jobs in May, well above expectations of 85,000, and the unemployment rate held at 4.3%. This DXY strength continues to pressure non-dollar gold buyers and caps upside momentum for the yellow metal.
Central banks resumed net gold purchases in April, having bought 17t. This was a rebound from the sizeable net sales reported in March. Poland remained the top buyer in the month (14t), while China intensified its pace of purchases: its 8t net purchase is the highest since December 2024 and extends its current buying run to 18 consecutive months. Meanwhile, Russia continues its sales streak this month (6t), with y-t-d sales of 22t. The structural bid from sovereign buyers remains intact despite Turkey and Russia selling under fiscal pressure.
Investors closely monitored developments in the Middle East, where US President Donald Trump stated that peace negotiations were nearing their final stage. However, Iran's Foreign Minister dismissed any meaningful progress, and Iran-backed Hezbollah rejected a US-mediated ceasefire proposal. Geopolitical risk premium remains elevated but has partially faded as markets digest the ongoing Iran-US diplomatic stalemate.
Key structural drivers include persistent central bank buying, with the World Gold Council reporting 244 tonnes of net purchases in Q1 2026, and ongoing haven demand. Individual investors sunk $95 million into the largest gold ETF, GLD, this month, the biggest single increase since October 2025, according to research from JPMorgan. However, the stronger dollar and hawkish Fed repricing are currently outweighing these bullish fundamentals.
Gold prices are expected to remain highly volatile this week amid the release of May Consumer Price Index (CPI) data, the University of Michigan's June inflation expectations, and other key macroeconomic indicators. Technical indicators show XAUUSD trading in a decision zone, with the $4,311-$4,334 range critical for determining whether prices repair back into value or continue their breakdown. Your verified levels at support $4,224 and resistance $4,475 align with this consolidation phase, suggesting range-bound action ahead of next week's inflation data.