Gold Prices Slip Below $5K as Strong US Jobs Data Dampens Fed Rate-Cut Hopes

Gold prices fell 3.2% on Thursday, slipping below $5,000 per ounce after robust US labour data crushed hopes of a near-term interest rate cut by the US Federal Reserve. Silver prices also dropped 10.8% to $74.95 per ounce, while spot platinum prices fell 6.2% and palladium shed 4.75%.

US jobs data released this week revealed that the jobs market emerged stronger than expected. Nonfarm payrolls increased by 130,000 jobs in January, following a downwardly revised 48,000 increase in December. Meanwhile, the unemployment rate notched down to 4.3%.

At the same time, initial jobless claims declined to 227,000 for the week ended 7th February. Strong labour market conditions bolster the Fed's confidence in the economy, allowing policymakers to maintain elevated rates in a bid to lower inflation. Gold prices are typically pressured by high rates, given the precious metal's non-yielding nature.

Meanwhile, hedge fund manager David Einhorn said in an interview this week he expected the Fed to lower interest rates 'substantially more than' markets are expecting, adding that Kevin Warsh is likely to deliver the lower borrowing costs that US President Donald Trump wants.

Investors now await US inflation data due today for more clarity on the Fed's near-term monetary policy roadmap. 'It looks like the expectation is that headline CPI is going to slow from 2.7% to 2.5%, perhaps as low as 2.4%. That may revive some rate-cut bets, and that would probably be favorable for gold,' said Zaner Metals strategist Peter Grant.

Algorithmic Trading Intensifies Gold Price Slump

According to market analysts, people likely placed their sell-stops either below $5,000 or above the $5,100-level to preserve their profitable positions due to extreme gold price volatility over the past month.

The gold price downtrend likely triggered stops when gold fell below the $5,000 level, creating a cascading effect, which led to further price declines.

Wall Street jitters, driven by a selloff in US stocks across asset classes over concerns about the impact of AI on company earnings, also spilled into precious metals. The considerable pullback in gold could also have been amplified by some investors who were compelled to sell commodities to cover margin calls.

'In many cases, investors hold these assets at the same time: when one side is sold off, the other faces redemption pressure,' said Liu Shiyao, an analyst with Zijin Tianfeng Futures. 'However, the impact won't be too significant. Gold is still in a consolidation phase.'

Although experts also attributed the gold slump to profit-taking activity and selling by commodity trading advisors using algorithms to bet on price action, ANZ Group analysts believe the gold rally is not 'mature enough to reverse anytime soon.' The brokerage now expects gold prices to reach $5,800 in Q2 2026.

Analysts supported their bullish outlooks for gold to resume its uptrend, arguing that drivers behind the recent price surge, including geopolitical tensions and concerns about the Fed's independence, remain intact.

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