Shares of the Goldman Sachs Physical Gold ETF slid to $42.77, shedding 3.2% in a single session after a blockbuster U.S. employment report forced traders to recalculate when — or whether — the Federal Reserve will cut interest rates this year. For holders of a fund that simply tracks the price of physical gold, the math is straightforward: higher rates make the dollar stronger and gold weaker, because gold pays no interest and becomes less attractive when cash and bonds do. Gold's Jobs-Day Reckoning: Can AAAU Recover if the Fed Is Now More Likely to Hike Than Cut?
Shares of Goldman Sachs Physical Gold ETF plunged 3.2% to $42.77 on Friday after the May jobs report landed like a bomb on rate-cut hopes. The U.S. economy added 172,000 jobs in May, well above forecasts of 85,000, following an upwardly revised 179,000 gain in April — a one-two punch that obliterated the soft-landing narrative gold bulls had been banking on. For an ETF that simply holds bars of physical gold in a vault, the implications are direct: every tick higher in rate expectations is a tick lower in the price of an asset that earns nothing.
• The Payrolls Shock Was Twice What Wall Street Expected. The May nonfarm payrolls number "was twice the size of consensus forecasts," and April's figure was also revised sharply higher.
March and April combined are now 93,000 higher than previously reported. Three straight months of strong hiring remove the Fed's excuse to ease. For AAAU holders, this means the opportunity cost of owning gold — foregoing interest income you could earn in Treasuries or savings accounts — just got more painful.
• Rate-Hike Bets Are Replacing Rate-Cut Hopes. Traders in interest-rate futures now price a November rate hike from the Fed as a 50-50 shot, and the market's consensus view for year-end rates rose to 3.87% — the highest such forecast this year. Markets currently assign an 85% probability to a quarter-point rate hike by year-end, up from 60% a week earlier. A rising-rate environment is kryptonite for gold.
• The Dollar Is Near a Two-Month High, Adding Another Headwind. The dollar index traded around 99.4, remaining close to a two-month high as stronger-than-expected labor data reinforced expectations of tighter Fed policy. Since gold is priced in dollars, a stronger greenback makes it more expensive for international buyers, suppressing demand globally. London gold bullion lost 3.9% for the week, dropping over $100 per ounce and hitting its lowest London afternoon price since the first trading day of the year.
• The Iran Conflict Cuts Both Ways for Gold. Paradoxically, the war that once boosted safe-haven demand is now hurting gold. Metals Focus notes the conflict "added downward pressure by raising inflation expectations, lifting sovereign yields and strengthening the case for higher interest rates."
U.S. inflation hit 3.8% in April, the highest since September 2023, driven by energy prices linked to the Iran conflict. Higher inflation locks the Fed into holding — or hiking — rather than cutting, which undercuts gold's appeal. AAAU's five-day slide from $44.81 to $42.77 reflects a market repricing gold for a world where cash pays more and the dollar stays strong.