Strong US non-farm data, Chinese central bank stops buying, gold suffers a "double blow"!

The unexpectedly strong US May non-farm payroll report shattered hopes of an early rate cut this year, coupled with the People's Bank of China pausing its gold purchases, causing gold prices to fall below $2300 per ounce on Friday, marking the largest drop in nearly three years.

"Gold bulls were hit with a double blow on Friday," Exinity's Chief Market Analyst Han Tan told the media on Friday.

Data released by the State Administration of Foreign Exchange on Friday showed that China's gold reserves at the end of May were 72.8 million ounces, unchanged from the previous month. Prior to this, China's gold reserves had been increasing for the 18th consecutive month since November two years ago, with a total increase of 10.16 million ounces during this period.

Tan said that the pause in gold purchases by the People's Bank of China eliminated a major pillar that had repeatedly pushed gold to historic highs.

Subsequently, explosive growth in US non-farm payrolls frightened the gold market, causing spot gold to fall below the $2300 mark.

In May, the US added a significantly higher-than-expected 272,000 new jobs, surpassing the expectations of all Wall Street analysts, with hourly wages also unexpectedly accelerating.

Ole Hansen, Head of Commodity Strategy at Saxo Bank, said, "The strong jobs report largely reversed the rate cut expectations of the past week. This report shattered hopes of an early rate cut, as stagnant wage growth and strong employment require higher rates to cool down."

Tan believes that unless the Fed's rate cut prospects become clearer and central banks resume gold purchases, the difficulty of gold prices continuing to rise significantly and set new records will increase under multiple bearish pressures.

After the employment report was released, spot gold plummeted by 3.7%, marking the largest drop since August 2021.

Silver plunged by over 7% at one point, marking the largest intraday drop since February 2021. Platinum and palladium prices also fell sharply.

Base metals collectively experienced significant declines.

London copper fell by nearly 4% to its lowest level since May 2.

London zinc fell by over 4.7%, marking the largest drop since October 2022.

London nickel fell 2.7% to a low since mid-April.

London aluminum and London tin fell by 2.7% and 3.1% respectively, to their lowest levels since early May.