HG MARKETS:

Gold (XAU/USD) extended its intraday gains through the Asian session on Friday, hovering close to the record highs touched earlier this week. The precious metal continues to benefit from a mix of dovish expectations for U.S. monetary policy, a weaker U.S. Dollar, and heightened geopolitical uncertainty across multiple regions.

Despite a stronger-than-expected U.S. Consumer Price Index (CPI) release on Thursday, the impact of higher inflation was overshadowed by growing evidence of a softening labor market. Weekly Initial Jobless Claims climbed to their highest level since October 2021, following last week’s disappointing Nonfarm Payrolls report. This string of weaker labor market data has reinforced expectations that the Federal Reserve may accelerate policy easing, further weighing on the greenback and boosting demand for non-yielding assets such as gold.

Market participants now almost fully price in three Fed rate cuts for the remainder of 2025. The CME FedWatch Tool shows a 100% probability of a 25-basis-point reduction at the upcoming September FOMC meeting, with two additional cuts anticipated in October and December. U.S. Treasury yields have responded accordingly, with the benchmark 10-year yield dropping to a five-month low, intensifying downward pressure on the Dollar.

Beyond U.S. economic dynamics, geopolitical risks are amplifying safe-haven demand. Political instability in France and Japan, combined with unresolved trade tensions, have added to uncertainty in global markets. According to the Financial Times, the Trump administration intends to urge G7 partners to impose sharply higher tariffs on India and China for purchasing Russian oil, a move aimed at pushing Moscow toward peace negotiations. Meanwhile, Japan’s Trade Ministry has introduced new export restrictions targeting entities linked to Russia, highlighting the persistence of sanction-driven trade disruptions.

The conflict in Eastern Europe took a new turn this week as Poland intercepted Russian drones that entered its airspace after operations in western Ukraine. This marked the first instance of a NATO member firing directly in Russia’s war, significantly raising the risk of escalation. Ongoing conflicts in the Middle East are adding another layer of geopolitical tension, pushing investors further into gold as a reliable store of value.

Despite the backdrop of risk-on sentiment in broader markets, gold’s resilience underscores the depth of demand from both institutional and retail investors. Exchange-traded funds (ETFs) backed by bullion have also seen renewed inflows, reflecting growing confidence that the metal’s uptrend could extend into the final quarter of the year.

Looking ahead, traders will closely monitor the preliminary University of Michigan Consumer Sentiment and Inflation Expectations data due later on Friday. While the release may trigger short-term swings in the U.S. Dollar and Treasury yields, the broader environment of weaker U.S. labor conditions, dovish Fed expectations, and persistent geopolitical stress continues to support gold’s upside bias.

Technical indicators suggest overbought conditions, which could lead to brief corrective pullbacks. However, the overall trend points higher, with any dips likely to be viewed as buying opportunities in the current macroeconomic and geopolitical climate.