Gold prices experienced a significant drop of 2.48%, closing at Rs 155,594. This decline was influenced by a stronger-than-anticipated US employment report, which bolstered expectations for a more stringent monetary policy. The US economy experienced an addition of 172,000 jobs in May, surpassing market expectations of 85,000. Meanwhile, the unemployment rate held steady at 4.3%, and wage growth showed a moderation to 3.4%. According to the data, there has been an uptick in investor expectations regarding a potential Federal Reserve rate hike later this year, which is impacting bullion prices.

Despite remarks from White House National Economic Council Director Kevin Hassett indicating potential for rate reductions, market sentiment continued to center on the robust labour market and ongoing inflation worries. Investment demand also showed signs of weakening during May. According to the World Gold Council, global physical gold ETFs experienced net outflows totalling $2 billion, primarily driven by Asia and North America. This resulted in a 2% decrease in total assets under management, bringing the figure down to $604 billion. Global holdings decreased by 0.4%, totalling 4,121 tonnes. In April, Swiss gold exports experienced a decline of 20%, primarily due to reduced shipments to the UK and China.

Conversely, there was an uptick in exports to India and Hong Kong. Physical demand has been relatively weak among key consuming countries, as Indian buyers exercise caution in light of fluctuating prices, while Chinese premiums have shown a slight decline. Nonetheless, the long-term perspective continues to be bolstered by strong acquisitions from central banks. Goldman Sachs has adjusted its forecast for central bank purchases to approximately 60 tonnes per month until 2026, highlighting the continued trend of reserve diversification in the context of geopolitical uncertainty. JPMorgan and Commerzbank have adjusted their near-term gold price forecasts downward; however, both institutions continue to hold a positive perspective for the longer term.

Technically, the market is experiencing new selling pressure as open interest increased by 5.97% to 8,807 contracts, while prices fell significantly, suggesting the establishment of new short positions. Gold has immediate support at Rs 154,050, with a break below potentially leading to Rs 152,515. On the upside, resistance is identified at Rs 157,860, and a sustained move above this level may initiate additional recovery towards Rs 160,135.