Gold prices in India decreased on Friday, with the price per gram dropping to 9,056.93 INR from 9,152.44 INR. Similarly, the price per tola fell to 105,638.30 INR from 106,752.20 INR the previous day.

The US economy contracted more than estimated at the start of 2025, with GDP declining at an annualised rate of 0.5% in the first quarter. The number of Americans filing for unemployment benefits decreased by 10,000, but Continuing Claims rose to 1.974 million.

Implications For Unemployment And Federal Reserve

This data suggests a potential increase in the US Unemployment Rate to 4.3% in June, possibly prompting the Federal Reserve to cut rates further. As a result, the US Dollar reached its lowest level since March 2022, potentially supporting Gold prices.

Attention now turns to the US Personal Consumption Expenditure Price Index data to determine future Federal Reserve actions. A strong showing could justify delaying rate cuts and support the USD.

Concerns over the Fed’s independence were raised following remarks from President Trump on interest rates. Central banks, particularly in emerging economies, increased their Gold reserves significantly, as 2022 saw purchases totalling 1,136 tonnes.

Gold, inversely correlated with the US Dollar and Treasuries, provides a hedge during economic instability and when risk assets falter. It tends to rise in value amid geopolitical tensions and lower interest rates.

In light of recent economic indicators, it is apparent that the first quarter of 2025 delivered weaker-than-expected performance in the United States, with GDP shrinking at a pace that caught markets somewhat off guard. This 0.5% contraction confirms a softer start to the year despite modest jobless claim improvements. One metric offering more insight lies in the Continuing Claims, edging higher to nearly two million—a level not typically associated with a tight labour market.

Dollar Weakness And Gold Support

This divergence between initial jobless claims and continuing ones paints a more nuanced picture than headlines may reflect. It implies that while fewer new layoffs are occurring, those already out of work are staying unemployed for longer periods. That slight imbalance could push the jobless rate up towards 4.3% come this June. A rising rate of unemployment increases the chances of a policy response from the Federal Reserve, especially in a climate where inflationary pressures from the consumer side remain uncertain.

The Dollar’s recent weakness, now at levels unseen since early 2022, adds another layer to the picture. That drop, in nearly direct proportion, offers underlying support to Gold prices. Although the spot price declined marginally in India, we can’t ignore the broader setup where bullion traditionally gains favour during currency softness and macroeconomic uncertainties.

Traders should direct their focus now to the upcoming PCE Price Index numbers. If the index surprises to the upside, it could pose complications for any anticipated interest rate cuts and momentarily strengthen the USD. On the other hand, muted inflationary pressure in this release would likely clear the path for easing rates.

Powell’s policy independence recently came into question after pointed commentary from Trump regarding interest rates. While such remarks aren’t new, what makes them noteworthy here is their timing, as central banks globally are increasing precautionary moves. For instance, back in 2022, authorities in developing economies ramped up Gold acquisitions to over a thousand tonnes, aimed at diversifying away from Dollar-denominated assets amid potential policy shifts in the US.

As investors, we recognise the enduring role of Gold as a safety buffer. The metal remains sensitive not only to monetary policy but also to wider concerns around global stability. Whenever yield-bearing assets begin to waver, or when economic growth enters a more precarious phase—as we now appear to be entering—sentiment towards Gold often improves. The behaviour of Treasuries and the Greenback remain closely linked to how bullish or bearish sentiment around precious metals unfolds in real time.

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