Gold futures surged nearly 1% in today’s trading, with the active June contract climbing about $30. This strong rebound from recent lows was fueled by a mix of economic developments that boosted the precious metal’s appeal. The rally was mainly driven by a weakening US dollar and disappointing employment figures.
The US dollar index dropped 0.6%, creating favorable conditions for gold, which often moves inversely to the greenback. The dollar’s decline reflected concerns over recent economic contraction data and ongoing uncertainty in trade policy enforcement.
Adding to market uncertainty, a court ruling questioned the legality of some emergency tariffs, though tariffs on steel and aluminum remain in place. President Trump has vowed to challenge these rulings, further complicating the economic outlook. However, analysts believe this legal battle had a minor direct effect on gold prices compared to other factors.
The most significant catalyst was disappointing employment data. Initial jobless claims for the week ending May 24 rose to 240,000, above expectations and up from the previous week’s 226,000. This rise in unemployment claims has intensified speculation that the Federal Reserve might consider interest rate cuts.
The weak jobs report has increased pressure on the Fed to ease monetary policy, which could weaken the dollar further and enhance gold’s appeal. Lower interest rates reduce the opportunity cost of holding gold, making it more attractive for investors seeking diversification and protection against inflation.
This report comes amid political pressure on Fed Chair Jerome Powell. Following President Trump’s criticism of the Fed’s decision to hold rates steady, Powell met with the president but reaffirmed the Fed’s independence from political influence. He emphasized that monetary policy decisions will remain data-driven.
Powell recently said, “I don’t think it’s up to a Fed chair to seek a meeting with the president… I’ve never done so, and I can’t imagine myself doing that,” underscoring the Fed’s traditional separation from executive pressures.
Despite the weak employment numbers and GDP contraction, market tools like the CME Fed Watch show only a 5.6% chance of a rate cut at the June 18 FOMC meeting. This probability remained stable even after today’s Labor Department and Bureau of Economic Analysis releases.
Powell’s data-focused approach means that a single week of negative economic data may not be enough to prompt immediate policy changes. The Fed typically waits for sustained economic weakness before altering rates significantly.
