Gold Slumps Below $2,300 as Fed Rate Fears Mount

Gold prices plunged on 29 May, with the spot metal falling 3.2% to trade at $2,286 per ounce. The sell-off marks a significant retreat from the record highs above $2,450 set earlier in the month, erasing all of May's gains. This weakness was reported by Investing.com, highlighting a sharp reversal in sentiment for the precious metal. Trading volume surged to 150% of the 30-day average, indicating a broad-based exit from long positions.

Context — [why this matters now]

The last comparable single-day decline of this magnitude occurred on 3 May 2025, when a stronger-than-expected jobs report triggered a 3.8% drop. The current macro backdrop is defined by resilient U.S. economic data and persistent inflation pressures. The core PCE index, the Fed's preferred inflation gauge, held steady at 2.8% year-over-year in the latest reading, well above the central bank's 2% target.

This data recalibration directly triggered the gold sell-off. Strong economic indicators reduce the immediate need for the Federal Reserve to implement interest rate cuts. Higher interest rates increase the opportunity cost of holding non-yielding assets like gold, making fixed-income investments more attractive by comparison. The catalyst chain began with strong retail sales data and was compounded by hawkish commentary from Fed officials.

Data — [what the numbers show]

Spot gold closed at $2,286 on 29 May, down $76 from the previous day's close. The loss brings the monthly performance to -1.5% after being up over 2% at the mid-month peak. The most actively traded gold futures contract (GCZ6) on the COMEX saw a steeper decline of 3.5%, settling at $2,291.

Gold's weakness stands in stark contrast to the performance of the U.S. dollar and Treasury yields. The U.S. Dollar Index (DXY) rallied 0.8% to 105.2, its highest level since early April. Concurrently, the yield on the 10-year Treasury note jumped 14 basis points to 4.52%, reflecting heightened expectations for a more restrictive monetary policy stance.

Metric	28 May Close	29 May Close	Change
Spot Gold	$2,362	$2,286	-3.2%
DXY	104.4	105.2	+0.8%
10Y Yield	4.38%	4.52%	+14 bps

Analysis — [what it means for markets / sectors / tickers]

The gold sell-off creates immediate winners and losers across related asset classes. Gold mining equities are the primary casualties; the NYSE Arca Gold Bugs Index (HUI) fell 5.1%, implying significant underperformance versus the physical metal. Major miners like Newmont Corporation (NEM) and Barrick Gold (GOLD) saw declines exceeding 6% in pre-market trading.

Conversely, financial sector ETFs like the SPDR S&P Bank ETF (KBE) gained 1.2% on the prospect of higher net interest margins. A counter-argument to the bearish gold narrative is sustained central bank buying. Official sector purchases have provided a structural floor for prices, with central banks adding a net 30 tonnes to reserves in April.

Positioning data shows a swift shift. Managed money funds were net sellers of over 15,000 gold futures contracts according to the latest CFTC Commitments of Traders report. This flow is rotating into short-duration Treasury ETFs and money market funds, which offer attractive yields without gold's volatility.

Outlook — [what to watch next]

The next major catalyst is the U.S. Nonfarm Payrolls report on 6 June. A print significantly above the consensus forecast of 190,000 new jobs would likely extend gold's weakness and could push the 10-year yield toward the 4.60% threshold. The subsequent FOMC meeting on 17-18 June is the primary event, where the updated dot plot will provide critical guidance on the rate path.

Key technical levels for gold are now in focus. A sustained break below the 100-day moving average at $2,275 could open the door for a test of the $2,200 support zone, last tested in February. Upside resistance is now firmly established at the $2,340 level, which was previous support.

Frequently Asked Questions

What does the gold price drop mean for retail investors?

For retail investors holding gold ETFs like GLD or physical bullion, the drop represents a paper loss and increases near-term volatility. It does not alter gold's long-term role as a portfolio diversifier. Retail investors should assess their risk tolerance, as further declines are possible if economic data remains strong and rate cuts are pushed into 2027.

How does this compare to the gold sell-off in May 2025?

The May 2025 sell-off was more severe at 3.8% but occurred from a lower price base near $2,100. The current decline is notable for its velocity from record highs and its correlation to a surging dollar. The 2025 event was largely isolated to gold, whereas the current move is part of a broader recalibration of interest rate expectations across all asset classes.

What is the historical context for a 3% daily gold move?

Moves of 3% or more in a single day are relatively rare for gold, occurring on average only 3-4 times per year. They are typically triggered by major macroeconomic surprises or shifts in monetary policy expectations. The volatility skew for gold options has jumped, indicating traders are pricing in an increased probability of further large moves in both directions over the next month.

Bottom Line

Gold's sharp decline reflects a repricing of Fed policy expectations, not a structural break in its long-term value.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. CFD trading carries high risk of capital loss.