Gold Shines Bright: Job Market Woes and Tariff Reversal Fuel Fresh Ascent

Gold prices soared past the $3,300 mark on Thursday, buoyed by a confluence of factors including disappointing US jobs data and a significant court ruling against previously imposed Trump-era tariffs. The precious metal, often sought as a safe haven, saw its value jump by 0.94%, with XAU/USD trading at $3,318 at the time of writing.

The latest report from the US Department of Labor revealed a greater-than-expected rise in initial jobless claims, adding to concerns about the health of the American labor market. This weak employment data, coupled with the confirmed contraction of US Gross Domestic Product (GDP) in the first quarter of 2025, put considerable downward pressure on the US Dollar. A weaker Greenback typically makes dollar-denominated assets like gold more attractive to international buyers, thereby boosting its appeal. The accumulating evidence of economic slowdown is also intensifying calls for the Federal Reserve to consider interest rate cuts, a move that would further support gold by lowering the opportunity cost of holding the non-yielding asset.

Adding to the bullish momentum for gold was a landmark decision by the US Court of International Trade. A three-judge panel declared that the Trump administration had unlawfully invoked a 1977 law to impose certain “Liberation Day tariffs” on numerous countries, effectively nullifying them.

This ruling, which frees nations like Mexico, Canada, and China from these specific duties (though tariffs on aluminum, autos, and steel remain), sparked a rally in global equities and initially saw gold dip to weekly lows as risk appetite increased. However, the broader implications of a weakening US Dollar, partly driven by the tariff reversal and economic data, ultimately propelled gold higher.

As the week progresses, bullion traders are keenly awaiting the release of the Core Personal Consumption Expenditures (PCE) Price Index, the Federal Reserve’s preferred measure of inflation. This data will provide further clues regarding the Fed’s future monetary policy trajectory.

Key Drivers Behind Gold’s Surge:

Plunging US Yields and Soft US Dollar: US Treasury bond yields are declining, with the 10-year Treasury note yield diving to 4.30%. Real yields also followed suit, dropping four basis points to 2.11%. This depreciation in yields, combined with a tumbling US Dollar Index (DXY), which has fallen 0.50% to 99.32, significantly enhances gold’s attractiveness.

Disappointing US Jobless Claims: Initial Jobless Claims for the week ending May 24 surged to 240,000, exceeding both prior week figures and market forecasts. This adds to the growing evidence of a softening labor market, increasing pressure on the Federal Reserve to consider easing monetary policy.

Confirmed Q1 GDP Contraction: The second estimate for US GDP in Q1 2025 confirmed a contraction of -0.2% quarter-on-quarter, reinforcing concerns about economic slowdown and stagflation risks.
Dovish Fed Sentiment: Minutes from recent Federal Reserve meetings reveal policymakers’ growing uncertainty regarding the economic impact of various policy changes, including tariffs. They acknowledge potential “difficult tradeoffs” if inflation persists alongside weakening growth and employment, suggesting a patient stance and a cautious approach to future policy decisions. Money markets are now pricing in approximately 49 basis points of easing by year-end, following the soft jobless claims report.

Increased Gold Imports: Data indicates that Gold imports to Switzerland from the US reached their highest level since at least 2012 in April, signaling robust demand for the precious metal.

Gold’s Technical Outlook:

Gold prices have successfully regained the $3,300 level and are currently trading near the May 28 daily high of $3,325. A sustained daily close above this level would pave the way for a challenge of $3,350. Should this resistance be overcome, the next targets for XAU/USD lie at $3,400 and the May 7 swing high of $3,438, with a potential push towards $3,500. Conversely, a drop below $3,300 could see gold retest $3,250, and potentially the 50-day Simple Moving Average (SMA) at $3,217.