Gold (XAU/USD) regained positive momentum on Friday, building on the previous day’s rebound from the $3,613–3,612 zone. During the Asian session, the precious metal climbed above the $3,650 level, remaining within striking distance of the record high reached earlier this week.
The supportive fundamental backdrop stems largely from soft US labor market data, which overshadowed higher-than-expected US consumer inflation. This article from Fletrade delivers a clear and well-rounded explanation of the subject.
Softer employment numbers have bolstered bets for more aggressive Federal Reserve (Fed) policy easing, causing the US Dollar (USD) to fall to its lowest level since July 24. This USD weakness continues to provide strong tailwinds for the non-yielding safe-haven commodity, reinforcing the bullish trajectory of Gold.
Macroeconomic Drivers Supporting Gold
The US Bureau of Labor Statistics (BLS) reported a seasonally adjusted 0.4% rise in the headline Consumer Price Index (CPI) for August, pushing the annual inflation rate to 2.9%, up from 2.7% in July. Meanwhile, the core CPI, excluding food and energy, climbed 0.3% monthly and 3.1% annually, matching market expectations.
Despite the higher-than-expected inflation reading, attention shifted to the US labor market. Weekly Initial Jobless Claims surged to the highest level since October 2021, adding to weak Nonfarm Payrolls data from last Friday. These signals suggest a softening labor market, which strengthens the case for Fed rate cuts and bolsters Gold demand.
According to the CME Group’s FedWatch Tool, markets have now priced in three rate cuts for the remainder of 2025. Traders see a 100% probability of a 25-basis-point cut at the next FOMC meeting, followed by two additional cuts in October and December.
This expectation has dragged 10-year US Treasury yields to a five-month low and contributed to the USD retreat, creating a favorable environment for XAU/USD bulls.
Geopolitical Tensions and Trade Uncertainties
Geopolitical risks and trade-related uncertainties continue to support Gold’s safe-haven appeal. Political unrest in France and Japan, coupled with ongoing conflicts in the Middle East, has driven investor flows toward the precious metal.
On the trade front, the US administration reportedly intends to pressure G7 nations to impose higher tariffs on India and China for buying Russian oil, aiming to push Moscow into peace talks with Ukraine. Meanwhile, Japan’s Trade Ministry announced additional export restrictions against certain foreign entities as part of sanctions on Russia.
Military escalations have further intensified risk aversion. Poland recently intercepted Russian drones after a mission in western Ukraine, marking the first time a NATO member fired shots in the conflict.
These developments add geopolitical tailwinds for Gold, reinforcing its role as a safe-haven asset, even amid a risk-on market mood.
Technical Outlook: Gold’s Price Dynamics
Technically, Gold remains in bullish territory, but overbought conditions signal the need for caution. The daily Relative Strength Index (RSI) shows overbought momentum, suggesting potential short-term pullbacks.
Immediate resistance is seen around $3,657–3,658, with follow-through buying likely pushing XAU/USD toward the all-time high near $3,675. Strong momentum could even test the $3,700 psychological level, consolidating the upward trend.
On the support side, the Asian session low around $3,630 serves as an initial floor, followed by the $3,613–3,612 swing low and the $3,600 round figure. If prices breach these levels, the weekly low at $3,580 may be tested, with a further decline toward $3,565–3,560 intermediate support and $3,510 as last Thursday’s swing low in a deeper corrective move.
Market Outlook and Short-Term Catalysts
Looking ahead, traders are focusing on the Preliminary University of Michigan US Consumer Sentiment and Inflation Expectations reports. These releases could influence USD dynamics and generate short-term trading opportunities for XAU/USD.
Despite occasional risk-on market sentiment, the underlying fundamentals suggest that the path of least resistance for Gold remains upward. Continued Fed rate cut expectations, geopolitical tensions, and persistent trade uncertainties are likely to maintain bullish momentum in the near term.
Conclusion
Gold’s climb above $3,650 underscores its resilience amid a dovish Fed outlook and a bearish USD environment. The safe-haven metal benefits from a combination of softening labor data, geopolitical risks, and trade uncertainties, while technical signals suggest potential for further gains.
Traders should monitor key resistance levels at $3,657–3,675 and support floors near $3,630–3,600 to gauge short-term price action.
With the market nearly pricing in three Fed rate cuts for 2025 and ongoing risk-off flows, Gold appears poised to extend its upward trajectory, remaining a strategic asset for investors seeking stability in volatile markets.
