Gold prices extended their rally, heading for a fourth straight weekly gain, driven by mounting expectations that the Federal Reserve (FED) will cut interest rates next week.

Concerns over a weakening US labor market have overshadowed inflation worries.

Kelvin Wong, senior market analyst at OANDA, said markets now expect at least three rate cuts before the end of 2025, far higher than earlier projections.

These expectations support gold, seen as a safe haven in times of economic uncertainty.

Data showed US consumer prices rose by 0.4 percent in August, while producer prices fell unexpectedly. 

Jobless claims also jumped last week, reflecting weakness in the labor market and reinforcing bets that the FED will cut its benchmark rate by 25 basis points next week.

Gold has gained 39 percent since the start of the year, fueled by a weaker dollar, increased central bank purchases, and looser monetary policy.

Yet it is struggling to break past the USD 3,900 level, a price point where it has repeatedly faced selling pressure, though analysts still expect strong performance ahead.