On Thursday, gold faced an unexpected pullback, with spot prices retreating from Wednesday’s record highs. Behind this move were stronger-than-expected U.S. labour data, which boosted the dollar, and a softer tone from U.S. President Trump on Iran, both of which further eroded safe-haven demand for gold.

Data released Thursday by the U.S. Department of Labor showed that initial jobless claims fell unexpectedly by 9,000 last week to a seasonally adjusted 198,000, well below economists’ expectations of 215,000.

This upside surprise pushed the U.S. Dollar Index to a six-week high, briefly hitting 99.49 before closing at 99.35, up 0.28%. A stronger dollar makes dollar-denominated gold more expensive for overseas buyers and thus weighs on demand.

The improvement in labour data also reinforced market expectations that the Federal Reserve will keep rates unchanged in the near term. The Chicago Fed President stressed that the Fed should prioritise bringing down inflation, as the jobs market has shown sufficient resilience.

The Kansas City Fed President went even further in opposing an immediate rate cut, arguing that inflation remains overheated and that Trump administration policies could further stimulate demand and add to price pressures.

These comments led federal funds futures to push out expectations for the next rate cut to June. The probability of a March cut has dropped from 50% a month ago to 21.6%. In such an environment, the appeal of non-yielding assets like gold naturally weakens, and investors rotate into dollar-linked assets in search of higher returns.

It is worth noting that while the current data appear strong, there may be flaws in the models used to estimate U.S. employment, potentially overstating actual gains. Future annual revisions could reveal underlying softness in the labour market. This offers gold a possible opportunity for a rebound later on, but in the short term, dollar strength is undoubtedly the main driver behind the pullback in gold prices.

Geopolitical factors have long been a sensitive trigger for gold, and President Trump’s more measured tone on the protests in Iran has further dampened safe-haven demand. He said he had been informed that killings in Iran’s crackdown on protests were easing and that there were currently no plans for large-scale executions. This marks a shift from earlier threats of intervention to a more wait-and-see stance. That change directly reduced market expectations for an escalation of conflict in the Middle East, thereby curbing demand for gold.

Market Commentary:

Overall, the Trump administration’s policy stance is shifting from active stimulus to a more cautious, wait-and-see approach—something that, in a low-rate environment, should in theory be supportive for gold. However, the current strength of economic data has temporarily overridden that logic. Investors should remain alert: if investigations into the Fed intensify or if there are sudden shifts in Trump’s policies, gold’s safe-haven appeal could quickly return and drive a sharp rebound in prices.