The Federal Reserve's interest rate cut expectations and geopolitical tensions have helped gold climb above $3,650, approaching an all-time high

Gold (XAU/USD) maintained positive momentum in Asian markets on Friday, continuing the previous day's rally from around $3,613 and breaking through $3,650 during the day, approaching the all-time high of $3,675 set this week.

Although the US CPI rose to 2.9% year-on-year in August, up from 2.7% in July, the core CPI remained at 3.1% year-on-year, and inflationary pressures remained, the weakness of the labor market became the focus of the market.

Initial US jobless claims rose to 263,000 last week, the highest level since 2021. Combined with weak non-farm payrolls data, markets have almost fully priced in expectations of a 25 basis point cut in September and are betting on two more cuts in October and December.

"Gold remains the main asset to benefit from a slowing labour market and easing policy expectations," said one analyst.

Political unrest in France and Japan, combined with persistent trade concerns, has added to market uncertainty, while Washington's plans to push the G7 to impose tariffs on Asian powers and India to limit their purchases of Russian oil have added to international tensions. Japan announced export controls on some overseas entities as part of sanctions against Russia.

In addition, Poland's interception of Russian drones entering its airspace marked the first time a member state has directly intervened in the Russian-Ukrainian conflict, raising fears of escalation. Continued conflicts in the Middle East also increased safe-haven buying, further supporting gold.

The daily chart shows that gold's RSI indicator is in the overbought range, suggesting that short-term high pullbacks need to be vigilant. If gold prices can break through and stabilize above $3,658, it is expected to challenge the historical high of $3,675 again, and even hit the $3,700 integer mark.

The lower support is at $3,630, followed by the $3,600 round digits in the $3,612 range. A break could trigger a deeper pullback, targeting the $3,580 or even $3,560 area.

Editorial opinion:

The current upward momentum of gold comes from the superposition of "dollar weakness + interest rate cut expectations + geopolitical risk aversion". Although the technical surface shows that the short-term overbought and there is a risk of correction, the macro environment is still biased towards bullish gold.

If the Federal Reserve releases a stronger easing signal next week, gold prices are expected to refresh their highs and break through $3,700. However, beware of volatility caused by short-term profit taking.