Gold Price Forecast: XAU/USD trades firmly near $3,650 on firm Fed dovish bets

• Gold price holds onto recent rally near $3,650 amid firm expectations that the Fed will cut interest rates next week.
• Traders raise Fed dovish bets amid growing downside labor market risks.
• The US inflation grew at a faster pace in August.

Gold price (XAU/USD) demonstrates strength near its all-time high around $3,650 during the European trading session on Friday. The precious metal trades firmly as the Federal Reserve (Fed)
seems certain to cut interest rates in the monetary policy meeting on Wednesday.

According to the CME FedWatch tool, traders see a 7.5% chance that the Fed will cut interest rates by 50 basis points (bps) to 3.75%-4.00% on September 17, while the rest point a standard 25-bps interest rate reduction.

Lower interest rates by the Fed bode well for non-yielding assets, such as Gold.

Fed dovish expectations have intensified due to escalating United States (US) labor market concerns. The US Department of Labor showed on Thursday that Initial Jobless Claims rose to 263K in the week ending September 5, the highest level seen in four years.

Meanwhile, rising inflationary pressures are also supporting the Gold price. Precious metals, such as Gold, perform strongly in a high inflation environment.

On Thursday, the US Consumer Price Index (CPI) report for August showed that the headline inflation rose at an annual pace of 2.9%, as expected, the highest level seen since February.

In Friday's session, investors will focus on the preliminary US Michigan Consumer Sentiment Index (CSI) and Consumer Inflation Expectations data for September, which will be published at 14:00 GMT.

Gold technical analysis

Gold price holds into gains near a fresh all-time high around $3,650. However, the upward-sloping 20-day Exponential Moving Average (EMA) near $3,517.70 suggests that the overall trend remains bullish.

The 14-day Relative Strength Index (RSI) jumps to near overbought levels around 80.00. Therefore, a corrective move looks likely.

On the downside, the April 22 high of $3,500 will remain a key support level for the Gold. Looking up, the round level of $3,700 will act as key resistance for the pair.

Gold daily chart