Gold prices fell to their lowest level in more than two months on Monday. Strong US employment data raised expectations that the Federal Reserve could increase interest rates this year.
Spot gold traded near $4,314 per ounce after dropping more than 3% on Friday. However, major Wall Street banks continue to forecast a recovery, supported by central-bank demand and reserve diversification.
US employers added 172,000 jobs in May, exceeding economists’ forecast of 85,000. April payroll growth was also revised higher, from an initial 115,000 estimate to 179,000.
Meanwhile, the unemployment rate remained at 4.3%. Hiring increased across leisure and hospitality, healthcare and local government, while employment in financial services declined.
Markets responded by raising expectations for tighter Federal Reserve policy. Traders placed the probability of a December rate increase above 70%, compared with about 45% one week earlier.
Treasury yields also climbed as investors adjusted their rate outlook. Higher yields often pressure gold since bullion does not provide interest payments. Additionally, the stronger dollar made the metal more expensive for buyers using other currencies.
Gold’s decline pushed prices below the 200-day moving average near $4,443. Ed Yardeni, president of Yardeni Research, said the next support level could sit at $4,000. “We reckon the next support is at $4,000,” Yardeni told clients. Nevertheless, he maintained his longer-term bullish outlook and projected gold could reach $5,500 by the end of 2026.
Han Tan, chief market analyst at Bybit, also warned that gold could test $4,000. He said such a move could follow hotter-than-expected inflation data or a more hawkish Federal Reserve meeting.
Oil prices added another concern after renewed strikes involving Israel and Iran. Rising energy costs can increase inflation pressure and give policymakers another reason to keep rates elevated.
Silver also faced heavy selling. Spot silver traded near $67.60 per ounce after recording a sharp decline on Friday. Platinum and palladium posted smaller losses during Monday’s session.
Goldman Sachs moved its expected first Federal Reserve rate cut from December 2026 to June 2027. It expects another reduction in December 2027, citing stronger employment and continued inflation pressure.
Nomura also expects rates to remain unchanged throughout 2026. Even so, major banks have not abandoned their higher gold forecasts.
Goldman Sachs maintains a $5,400 year-end target. JPMorgan expects gold to approach $6,000 by the end of 2026, while Wells Fargo Investment Institute projects a range between $6,100 and $6,300.
Bank forecasts vary as market conditions change. However, their bullish outlook largely rests on continued official-sector demand rather than expectations for immediate monetary easing.
Gold has overtaken US Treasuries as the largest single asset in global central-bank reserves. European Central Bank data show gold represented 27% of official reserves at the end of 2025.
US Treasuries accounted for 22%, down from 25% one year earlier. Gold’s share rose from 20%, supported by higher prices and continued central-bank buying.
However, gold’s rise above US Treasuries does not mean the US dollar has lost its broader dominance in global reserves. Other dollar-denominated assets still keep the currency dominant across global foreign-exchange reserves.
In addition, central banks bought more than 1,000 tonnes of gold annually from 2022 through 2024. Purchases later slowed, although official institutions continued adding bullion to diversify their holdings.
This reserve shift helps explain why major banks remain bullish on gold despite delayed Fed rate cuts. Strong official demand continues to provide support as investors watch inflation data and the $4,000 price level.