Non-farm payroll data for May in the U.S. came in above expectations, dampening investors’ expectations regarding the likelihood of the U.S. Federal Reserve (Fed) cutting interest rates this year. Following the data release on Friday, both precious metals and recently popular tech stocks faced heavy selling pressure.
Profit-taking picked up pace in the markets, particularly in the artificial intelligence and semiconductor industries, following the strong rally seen in recent weeks. Ryan Detrick, Chief Market Strategist at Carson Group, pointed out that technology and semiconductor stocks had risen to record levels over the past nine weeks, noting that the strong jobs report had put the Fed in a tougher position regarding whether to cut rates for the remainder of the year. According to Detrick, investors are reacting to this situation by selling off the year’s top-performing stocks.
In the precious metals sector, meanwhile, notable declines were seen in gold and silver prices. Phil Streible, Chief Market Strategist at Blue Line Futures, expressed that some investors reducing their gold positions to offset losses in other asset classes has increased selling pressure on precious metals.
Bart Melek, Head of Global Commodity Strategy at TD Securities, said that non-farm payroll data significantly exceeded market expectations, making it even harder for the Fed to cut interest rates under current economic conditions. Melek noted that ongoing conflicts in the Middle East, high energy prices, and persistent inflationary pressures could keep interest rates high for an extended period.
According to analysts, the high-interest-rate environment increases the opportunity cost of gold—which does not yield interest—for investors. Consequently, it is assessed that pressure on gold could persist if the Fed delays rate cuts or maintains a tight monetary policy for a longer period.
