Gold entered the new week deep in a correction, hovering near three?month lows around $4,300 per ounce. After amazing US nonfarm payrolls and a sharp hawkish shift in Federal Reserve rhetoric, the precious metal lost more than 3% on Friday and continued lower on Monday, breaking the key psychological and technical support of the 200-day moving average ($4,380.00). Investors are now waiting for the US inflation (CPI) release on Wednesday, which could be a turning point for the market.

Fundamental backdrop: a hawkish shock and escalation

The main catalyst for the crash was the US nonfarm payrolls (NFP) report for May, released on Friday. The figures exceeded the most optimistic expectations.

Key figures: actual payrolls came in at 172,000 (vs. a forecast of 85,000). March and April data were revised up by a combined 93,000 jobs, while the unemployment rate remained at 4.3%.

This data completely changed market expectations. Markets now price in more than a 70% chance of a Fed rate hike before the end of 2026 (up from about 50% before the report).

The US dollar index (USDX) jumped, breaking the psychological 100.00 level for the first time since early April. The 10-year Treasury yield shot above 4.58%, making the dollar very attractive on a yield basis compared with gold, which pays no yield.

Contrary to expectations, renewed fighting in the Middle East over the weekend did not support gold. Israel and Iran exchanged direct missile strikes and Yemeni Houthis hit Israeli territory. This paradoxical reaction is explained by the "oil channel": geopolitical crises push oil prices higher, which raises inflation expectations and in turn prompts central banks toward tighter policy — a major bearish factor for gold.

Short technical analysis

The technical picture for XAU/USD has deteriorated sharply, confirming a medium-term trend change after the break of the key $4,380.00 support (200-day EMA on the daily chart). Gold has broken and settled below this critical medium-term level.

A descending channel has formed on the daily and 4-hour charts, within which price has traded since mid-May. Today it is testing the lower boundary of that channel on the daily chart, near $4,315.00, and the round level of $4,300.00.

The RSI (14) on the daily chart is around 32–33, approaching the oversold zone. This suggests selling momentum is tiring and increases the probability of a short?term consolidation or technical bounce.

However, if the $4,255.00 support (50 EMA on the weekly chart) also fails, that would be another very strong bearish signal.

Key events this week

Conclusion

Gold is under heavy pressure from a combination of hawkish forces. Strong US labor data (NFP) and the subsequent re-pricing of Fed rate expectations (probability of a hike now over 70%) inflicted a severe blow to a non-yielding asset. The dollar strengthened above 100.00, and the 10?year yield rose above 4.50%.

The technical break of the 200-day moving average ($4,380.00) confirmed a trend change, and the market is now searching for a bottom. The $4,255.00–$4,380.00 zone will be the battleground in the coming days. A technical break below $4,250.00 would open the way to 4,100.00 and lower. However, very low RSI readings (around 33) suggest the sell-off may lose momentum.

Economists say that after overcoming short-term obstacles, gold could recover to $5,500.00 by the end of 2026 as central banks continue aggressive reserve accumulation.

Investors should exercise extreme caution. US inflation data on Wednesday will be the defining macro test — any upside surprise will strengthen the dollar and likely send gold below the key $4,255.00 support. Weak inflation could deliver a welcome bounce, which, given current conditions, may still amount to only a corrective rally.