Strong US employment data has fueled market expectations of a Federal Reserve interest rate hike this year, putting heavy pressure on gold and causing spot gold to give back all of this year's gains. During the US session, gold plunged about 3.5%, breaching the $4,320/oz level. Bond yields and the US dollar both rose, amplifying the sell-off.
The robust labor market gives the Fed room to tighten further. While Middle East tensions are pushing energy costs higher, rising rate expectations are directly bearish for non-yielding bullion. Higher rates increase the opportunity cost of holding gold, which generates no income, while a stronger dollar curbs foreign demand and higher bond yields provide attractive alternatives. The shift in monetary policy views is thus driving capital away from gold, highlighting the key role of rate expectations in precious metal pricing.