Gold prices experienced a significant sell-off on Thursday, a notable move given the backdrop of escalating tensions in the Middle East. The precious metal’s spot price fell by as much as 4.3%, trading in a range of approximately $3,630 to $3,670 per ounce. This downward pressure was the result of three distinct factors converging simultaneously on the market.
Robust US Labor Data Reinforces Hawkish Outlook
Fresh US employment figures for March, released on Friday, provided no relief for the beleaguered asset. The American economy added 178,000 new jobs, surpassing economists’ forecasts. The unemployment rate edged lower to 4.3%. Stronger labor market data supports the narrative of a prolonged restrictive monetary policy from the Federal Reserve, creating a persistent headwind for non-yielding gold.
Oil Shock Alters Interest Rate Expectations
The initial catalyst for the move was a rapid surge in crude oil prices. Brent crude jumped above $112 per barrel following a US address, a level that immediately fueled inflation expectations. Higher energy costs translate to more persistent inflation, which in turn limits the Fed’s flexibility. Consequently, the likelihood of interest rate cuts in July and September diminished noticeably, while the potential for further hikes increased. In such an environment, gold, which offers no yield, becomes less attractive compared to interest-bearing assets.
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Central Bank Selling Adds Physical Pressure
Additional selling pressure originated from the Turkish central bank. In the past week alone, it reduced its gold reserves by 69.1 tonnes to 702.5 tonnes—marking the largest weekly decline since at least 2013. Over a two-week period, the total drawdown exceeds 118 tonnes. Market analysts interpret this as an effort to generate liquidity in lira and foreign currency amidst the ongoing regional conflict. Such substantial physical sales from a major central bank significantly weighed on market sentiment.
Despite the current pressures, Goldman Sachs maintains its year-end 2026 price target of $5,400. The bank cites the long-term diversification trend in central bank reserves and an expected normalization of speculative positioning as key reasons. There are early signs of physical demand responding to lower prices; in India, gold traded at a premium for the first time in two months, suggesting cheaper levels are attracting buyers. Chinese investors, however, appear to be waiting for a deeper correction. Whether the $3,600 area will provide a floor will become clearer in the coming trading sessions as markets continue to digest the combined impact of the oil price shock and shifting Fed expectations.
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