Gold Prices Surge as NFP Looms and Fed Rate Cut Bets Intensify

New York, June 5, 2025 - Gold prices climbed higher on Thursday, reaching $3394.42, a 0.65% increase, as investors capitalized on a dip above the key support zone of $3277.91 to $3310.48. The rally, underpinned by the 50-day moving average at $3256.60, sets a bullish tone ahead of Friday’s critical U.S. nonfarm payrolls (NFP) report. A weaker-than-expected NFP could propel gold toward the May 6 high of $3435.06, with the $3500.20 level in sight.

Falling Treasury yields and disappointing economic data, including a weak ADP payroll report, have bolstered expectations for Federal Reserve rate cuts, creating a favorable environment for gold. Meanwhile, silver’s breakout above $35 per ounce, a level not seen since October 2012, underscores the precious metals’ strength amid growing economic uncertainty.

Gold’s Bullish Momentum Builds

Gold’s upward trajectory is supported by a robust technical setup, with the 50-day moving average providing a solid foundation for further gains. The metal’s ability to hold above the $3277.91 to $3310.48 support zone has emboldened bulls, who are now targeting the $3435.06 high from May 6. A breakout above this level could open the door to $3500.20, a psychological and technical milestone.

The broader market context favors gold, as investors anticipate a dovish shift from the Federal Reserve. Analysts note that gold’s appeal as a non-yielding asset strengthens in a low-interest-rate environment, particularly if economic data continues to signal a slowing U.S. economy.

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Weak Economic Data Fuels Rate Cut Speculation

Wednesday’s ADP private payrolls report, which showed just 37,000 jobs added in May against expectations of 110,000, has intensified focus on the upcoming NFP data. This follows weaker-than-expected ISM services data, which came in at 49.9 compared to the forecasted 52.1, signaling contraction in the services sector.

The combination of soft labor and services data has prompted markets to reassess the Federal Reserve’s policy stance. Political pressure is also mounting, with President Trump renewing calls for immediate rate cuts, adding to the narrative of a potential Fed pivot. Lower interest rates typically reduce the opportunity cost of holding gold, enhancing its attractiveness to investors.

Treasury Yields Retreat, Boosting Gold’s Appeal

U.S. Treasury yields continued their decline on Thursday, with the 10-year note dropping to 4.336%, the 2-year yield falling to 3.86%, and the 30-year bond yield sliding to 4.845%. The yield retreat, driven by disappointing economic indicators, has further supported gold’s rally. Investors are closely monitoring upcoming economic releases, including April trade data and initial jobless claims, for additional clues about the Fed’s next moves. A sustained drop in yields could amplify gold’s upward momentum, particularly if Friday’s NFP report confirms labor market weakness.

Silver’s Surge Signals Broader Precious Metals Strength

While gold held steady within a range for much of Thursday, silver stole the spotlight by breaking above $35 per ounce, a level not seen in over a decade. This breakout reflects growing investor confidence in precious metals as a hedge against economic uncertainty. Analysts suggest that silver’s surge could foreshadow further gains for gold, as both metals often move in tandem during periods of market volatility. The combination of silver’s strength and gold’s resilience highlights the bullish sentiment in the precious metals market as traders await key economic data.

Did You Know?
Gold has historically outperformed during periods of U.S. labor market weakness, gaining an average of 8% in the three months following NFP reports showing below-expected job growth since 2000.

Outlook: NFP to Shape Gold’s Next Move

With gold firmly above its key support and technical indicators pointing upward, the market’s near-term outlook remains bullish. A soft NFP report could solidify expectations for a Federal Reserve rate cut, potentially driving gold past $3435 and toward $3500.

Even if NFP data surprises to the upside, the current low-yield environment and economic uncertainty provide a supportive backdrop for gold prices. Investors are advised to monitor bond yields and Fed commentary closely, as these will play a critical role in determining gold’s trajectory in the coming weeks.