On Friday, the price of metal fell below $2,300 per ounce, marking the largest drop in nearly three years. Silver plummeted 7%, and basic metals such as copper, nickel and aluminum also fell sharply.
The unexpectedly strong US non-farm payroll report in May shattered hopes for an early interest rate cut this year, coupled with the pause in China's central bank's shareholding of gold, sending gold prices falling below $2,300 per ounce on Friday, marking the largest drop in nearly three years.
"The bullion market was dealt a double blow on Friday," said Han Tan, chief market analyst at Exinity, to the media.
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, the same as the previous month. Prior to this, China's gold reserves had been increasing for 18 consecutive months since November 2019, with a total shareholding of 10.16 million ounces during this period.
Tan said that the pause in China's central bank's shareholding has removed the main support for gold's repeated historical highs.
Immediately afterwards, the explosive growth in US non-farm payroll employment numbers frightened the gold market, causing spot gold to fall below the $2,300 level.
The number of new jobs added in the US in May rebounded sharply to 272,000, surpassing the expectations of all Wall Street analysts, and hourly wages also unexpectedly accelerated.
"The strong employment report largely reversed the interest rate cut expectations of the past week. This report destroys hopes for an early interest rate cut. Stagnant wage growth and strong employment require high rates to cool down," said Ole Hansen, head of commodity strategy at Saxo Bank.
Tan believes that unless the prospect of a Fed rate cut is more certain and the central bank starts buying gold again, it will be more difficult for gold prices to continue to rise substantially and break records under multiple bearish pressures.
After the employment report was released, spot gold plummeted by 3.7%, the largest drop since August 2021.
Silver fell more than 7% at one point, the biggest intraday drop since February 2021. Platinum and palladium prices also fell sharply.
Basic metals fell collectively.
Copper in London fell nearly 4% to its lowest level since May 2.
London zinc fell more than 4.7%, the largest drop since October 2022.
London nickel fell as much as 2.7% to its lowest level since mid-April.
London aluminum and tin both fell 2.7% and 3.1%, respectively, to their lowest levels since early May.
Editor/Emily