Gold approaches record high

Gold climbed to around $3,650 per ounce on Friday, edging closer to its record high and heading for a fourth consecutive weekly gain as markets held firm in their expectations of looser US monetary policy.

Recent data painted a picture of softening inflationary pressures and weakening labor conditions. The annual inflation rate stayed steady in line with forecasts, following a surprise decline in producer prices, while weekly jobless claims surged to their highest level in four years, highlighting stress in the employment market.

Together, these signals reinforced speculation that the Federal Reserve will move to ease policy at its upcoming meeting, with futures fully pricing in a 25 basis point rate cut and some investors betting on the possibility of a larger half-point move.

Beyond monetary policy, geopolitical tensions continued to bolster gold’s safe-haven appeal. Washington is reportedly pressing its G7 allies to impose higher tariffs on India and China for their purchases of Russian crude, escalating pressure on Moscow while raising the risk of broader trade frictions.

At the same time, conflict in the Middle East has intensified, adding to investor nervousness. In Europe, Poland announced that it intercepted Russian drones that crossed its airspace during heavy bombardments in western Ukraine, underscoring the risk of further spillovers from the war.

The combination of dovish monetary expectations and heightened geopolitical risk has created a strong backdrop for bullion, even as the US dollar remains firm. Analysts suggest that a confirmed pivot to easier Fed policy could open the door to fresh record highs for gold, particularly if accompanied by persistent geopolitical uncertainty and ongoing central bank purchases, notably from emerging market economies.

Still, any upside surprise in consumer inflation or a less dovish tone from Fed Chair Jerome Powell next week could temporarily cap gains.