Strong U.S. employment data fuels rate hike expectations, weighing on gold prices and erasing its year-to-date gains

Fueled by robust U.S. employment data, markets widely anticipate that the Federal Reserve may raise interest rates this year—exerting pressure on the gold market and causing gold to fully reverse its year-to-date gains. During U.S. trading hours, spot gold fell approximately 3.5%, breaking below USD 4,320 per ounce and failing to sustain its upward momentum for the year. Concurrently, both bond yields and the U.S. dollar index rose. The strong labor market provides Fed officials with room to hike rates; however, escalating tensions in the Middle East have driven up energy prices. Rising interest rates typically weigh on non-yielding precious metals.