Gold Prices Plummet as Strong US Data Triggers Rate Hike Expectations
Gold prices have plummeted nearly 7% since June 5, erasing all gains made this year. The sharp decline is largely attributed to strong US economic data and a resulting shift in expectations for interest rate hikes by the Federal Reserve under new Chair Kevin Warsh.
The latest employment figures showed an impressive 172,000 new jobs in May, exceeding analysts' expectations and signaling a robust economy. This has led traders to price in at least one rate hike by year-end, making bonds more attractive as a safe haven than precious metals.
The Fed's dual mandate is to control inflation and maintain a strong labor market. With the economy growing strongly enough to absorb a slowdown, the central bank now has more room to focus on curbing rising energy prices and inflation.