Gold prices plunged 3.27% on Friday to $4,339 an ounce, wiping out all of this year's gains in a single session. The sharp selloff came after the U.S. economy added 172,000 jobs in May — nearly double the 85,000 analysts had expected — sending the dollar higher and pushing bond markets to price a 68% chance of a Federal Reserve rate hike by December.
Jobs Report Reshapes Rate Expectations
May's payrolls data blindsided traders who had entered 2026 betting on three rate cuts. Now the market is pricing a hike. Cleveland Fed President Beth Hammack said the central bank may need to act soon to bring inflation back to 2%, offering no timetable beyond a general sense of urgency. The dollar rallied on her comments and the jobs number, putting further pressure on gold, which is priced in dollars and becomes more expensive for holders of other currencies.
Banks Still See Massive Upside
Despite the selloff, major Wall Street firms are holding onto bullish year-end targets that imply 23% to 44% upside from current levels. Goldman Sachs sees gold at $5,400 by year-end. JPMorgan's case ranges from $6,000 to $6,300. Deutsche Bank and UBS both target $6,000 and $5,900 respectively. The four banks share a common thesis: central bank buying continues to accelerate, a structural shift away from dollar-denominated reserves is underway, and geopolitical risk premiums aren't fading.
What Friday's Drop Means for the Bull Case
The question now is whether the macro backdrop — a hot labor market, a hawkish Fed — can derail that thesis. Higher interest rates make non-yielding assets like gold less attractive relative to bonds. But the banks argue that central bank demand, which is less sensitive to short-term rate moves, will keep a floor under prices. Friday's slide tested immediate support around $4,300. A break below that level could open the door to $4,200, a level not seen since early January. On the upside, gold would need to reclaim $4,500 to signal the selloff was an overreaction.
The next big data point comes with the Fed's June meeting, where the Summary of Economic Projections will show where policymakers see rates heading. Hammack's comments suggest at least one hawkish dissenter could emerge. For gold, the path from here depends on whether the jobs report is a one-month outlier or the start of a trend that forces the Fed to deliver on what the bond market is now pricing.
