Gold prices weakened and briefly fell below USD 4,000 per troy ounce for the first time since early November, before recovering. The move comes as strong US data and hawkish Federal Reserve rhetoric keep expectations of tighter monetary policy in place, maintaining pressure on the yellow metal.
The Fed’s preferred inflation gauge, based on private consumption, rose in May as expected to just above 4%, marking its highest level in three years. With growth seen as remaining robust, rate-hike expectations have persisted, though attention now turns to next Friday’s US labour market report: a merely solid reading and slower job creation could temper interest rate concerns and help stabilise gold’s recent downward trend.
Gold Price Weakness and Market Positioning
We see a challenging environment for gold, with prices recently breaking the key $4,000 support level before a minor recovery. This weakness is driven by speculation of further Fed interest rate hikes, a sentiment reinforced by May’s PCE inflation reading of 4.1%. CME Group data shows a notable increase in short positions on gold futures, reflecting this bearish mood.
Labor Market Impact and Trading Strategies
All eyes are now on the US labor market report due next Friday, July 3, 2026. We believe a slowdown in job creation could ease the market’s rate hike concerns. A Non-Farm Payrolls (NFP) number below the consensus forecast of 190,000 would signal a cooling economy, potentially pausing the Fed’s hawkish stance.
Given the potential for stabilization rather than a sharp rebound, we are looking at selling out-of-the-money put options on gold futures for July or August expiration. Elevated implied volatility ahead of the jobs report makes this an attractive strategy to collect premium. The goal is to profit if gold simply stops its decline and trades sideways or modestly higher.
Historically, gold has shown a strong inverse correlation to the US dollar following weaker-than-expected NFP reports. For instance, during the economic slowdown scares of late 2023, softer labor data consistently preceded significant gold rallies as rate expectations were pared back. We expect a similar, though perhaps more muted, reaction if job creation disappoints next week.
