Gold’s Trump Ceasefire Tweet Stems the Bleeding After Jobs Shock, but Rate Hike Odds and Dollar Strength Loom Large

A brutal selloff in gold that erased nearly 8% over the past month was abruptly halted Tuesday when a social media post from Donald Trump promising a rapid ceasefire in the Middle East dragged the metal off its lows. The yellow metal had been pummelled by a stunning US jobs report that all but extinguished hopes for lower interest rates, sending the dollar surging and pushing gold below its 50-day moving average. As of late trading, the spot price hovered around $4,359 an ounce, nursing a four-and-a-half percent drop from the previous week alone.

The trigger for the latest leg down was the May non-farm payrolls report, which showed 172,000 new jobs created — nearly double the number analysts had penciled in. That labour market strength immediately rewired rate expectations. Market-implied odds of a Federal Reserve rate hike by year-end rocketed above 70%, while Goldman Sachs now sees the first cut arriving only in 2027. For a zero-yield asset like gold, higher rates are a direct headwind, making competing havens like US Treasuries suddenly far more attractive.

Yet the geopolitical backdrop could hardly be more supportive. Escalation between Israel and Iran sent oil prices spiking, and gold initially traded higher on the news. But the dollar’s rally — fuelled by the repricing of Fed bets — quickly overwhelmed that safe-haven bid. It took Trump’s unexpected call for a truce to restore some calm, briefly pushing gold back into positive territory before the underlying rate anxiety reasserted itself.

Should investors sell immediately? Or is it worth buying Gold?

Beneath the volatility, a structural shift in demand is quietly unfolding. Official-sector buying remains a crucial floor under prices: China added another ten tonnes to its reserves in May, marking the 19th consecutive month of accumulation. Over the longer term, the composition of investment demand is changing. For the first time this year, global demand for bars and coins is expected to surpass that of the jewellery market, propelled by surging purchases in China and India. That secular trend, along with the record central-bank hoarding of over 1,100 tonnes in 2022, provides a counterweight to the speculative outflows weighing on the spot price.

Analysts see the current selloff as a correction within a longer bull run. Metals Focus projects an average price of $4,920 for the full year. Ed Yardeni of Yardeni Research is more aggressive, targeting a swift rebound to $5,500 by year-end once the Iran tensions ease, and has even pencilled in $10,000 by the end of the decade. For now, however, the near-term narrative belongs to interest rates.

Traders are now bracing for two pivotal events: the US inflation data due Wednesday and Thursday, and the Federal Reserve’s mid-June meeting. A hot consumer price print could accelerate the decline, testing the $4,000 threshold. Should the labour market remain this resilient, gold may find itself squeezed between geopolitical fear and monetary reality for some time to come.

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