Gold edges higher after steep pullback, investors eye US-China talks

• Gold trims part of last week's losses as softer US-China rhetoric tempers risk aversion, though market sentiment remains fragile.
• US-China trade talks set for Malaysia this week as Bessent and He Lifeng meet to restart dialogue after last week's flare-up.
• Markets eye key CPI and PMI data on Friday while Fed officials remain in blackout period before the October 29-30 FOMC meeting.

Gold (XAU/USD) edges higher on Monday, recovering modestly after Friday's steep decline from record highs near $4,380. At the time of writing, XAU/USD is trading around $4,280 during the European session, up over 0.50% on the day.

The yellow metal saw its largest intraday drop since mid-May, sliding 1.76% as investors locked in profits following remarks from US President Donald Trump, who struck a softer tone on China. Trump said the US is "going to do fine with China," adding that the threatened 100% tariffs on Chinese imports "aren't sustainable," which helped calm market nerves and triggered a rebound in the US Dollar (USD) and Treasury yields.

While the easing of trade tensions brought some short-term relief, traders remain cautious as Trump's unpredictable trade rhetoric continues to fuel global uncertainty. The market is reluctant to commit strongly in either direction, awaiting fresh cues from US-China developments and the upcoming diplomatic meetings. The absence of follow-through selling on Monday suggests that Gold's retreat was more of a corrective pause than the start of a deeper reversal, as investors reassess the broader macro backdrop.

Despite the pullback, downside risks remain limited. The metal continues to draw support from a dovish Federal Reserve (Fed) outlook, the prolonged United States (US) government shutdown, and persistent geopolitical and economic uncertainty. These factors, combined with steady central bank demand and strong inflows into Gold-backed ETFs, keep the broader uptrend intact.

Market movers: Markets eye US-China talks and CPI data amid prolonged government shutdown

• President Donald Trump said on Monday that he is "not looking to hurt China" but outlined key US demands ahead of this week's trade talks, including higher Chinese purchases of soybeans, the removal of rare-earth export curbs and tighter controls on fentanyl.
• US Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng will meet in Malaysia this week to restart dialogue after last week's trade flare-up.
• According to a Reuters report, global companies estimate they have absorbed more than $35 billion in costs from US tariffs. A Reuters analysis of hundreds of corporate statements, regulatory filings and earnings calls between July 16 and September 30 shows firms expect a combined financial hit of $21-22.9 billion in 2025 and nearly $15 billion in 2026.
• Renewed clashes broke out early Monday in the Gaza Strip after Israel launched airstrikes in response to alleged overnight ceasefire violations by Hamas, ending a brief period of calm and reigniting fears of a wider regional escalation.
• The ongoing US government shutdown has entered its twentieth day, with no resolution yet after the Senate's repeated failures to approve a temporary funding measure, the latest of which marked the tenth unsuccessful attempt to end the stalemate. Lawmakers are expected to vote again on Monday when the Senate returns to session.
• The US economic docket is light this week, with focus on the Consumer Price Index (CPI) report due on Friday, which was postponed earlier because of the government shutdown. Friday will also bring the preliminary S&P Global Purchasing Managers Index (PMI) readings for October. Fed officials are now in their pre-meeting blackout period ahead of the FOMC (Federal Open Market Committee) meeting scheduled for October 29-30.

Technical analysis: XAU/USD steadies above $4,220 amid renewed buying interest

XAU/USD) steadies after Friday's sharp pullback from record highs, suggesting a potential short-term peak near the all-time high around $4,380. On the 4-hour chart, spot prices are hovering above the 21-period Simple Moving Average (SMA) at $4,256.

Immediate support is seen near $4,200, where dip-buying interest continues to emerge. A sustained move below this level could expose the 50-period SMA near $4,140. On the upside, $4,300 remains the immediate resistance, and a break above it could open the way for a retest of the all-time high.

The Relative Strength Index (RSI) is holding around 57, recovering after retreating from overbought territory. As long as the RSI stays above 50, the setup favors a healthy consolidation phase rather than a deeper correction, keeping the broader bullish trend intact.