Gold on the back foot as markets eye US inflation data

• Gold extends losses on Friday as a stronger US Dollar and steady Treasury yields weigh on sentiment.
• Despite near-term pressure, dovish Fed expectations and safe-haven flows continue to provide a supportive backdrop for Gold.
• The US CPI release takes center stage as one of the few major data points available during the ongoing government shutdown.

Gold (XAU/USD) trades on the back foot on Friday, as sellers remain firmly in control following a sharp pullback from record highs earlier this week. The downside, however, appears limited ahead of the key US Consumer Price Index (CPI) report due later at 12:30 GMT, which could set the near-term tone for the metal.

At the time of writing, XAU/USD is trading around $4,060, easing nearly 1.5% on the day and poised to break its nine-week winning streak amid a firmer US Dollar (USD) and steady Treasury yields.

The pullback from record highs was largely driven by profit-taking and hopes of a de-escalation in the renewed US-China trade standoff. The White House confirmed on Thursday that US President Donald Trump will meet his Chinese counterpart Xi Jinping on October 30 on the sidelines of the APEC Summit in South Korea, a development that helped ease recent trade tensions.

Despite the recent pullback, the fundamental backdrop for Gold remains supportive. The prolonged United States (US) government shutdown and persistent geopolitical and economic uncertainties continue to drive safe-haven demand for the yellow metal.

At the same time, markets widely expect the Federal Reserve (Fed) to trim interest rates by 25-basis-point (bps) at its October 29-30 monetary policy meeting. Lower borrowing costs typically enhance the appeal of non-yielding assets like Gold, as they reduce the opportunity cost of holding the metal.

Market movers: US CPI takes center stage ahead of high-level trade talks

• The US CPI report, delayed by the ongoing government shutdown now in its fourth week, has gained added importance as one of the few key data releases available to gauge the health of the economy. Headline CPI is expected to rise 0.4% MoM in September, matching August's pace, while the annual rate is seen ticking up to 3.1% from 2.9%. The core CPI, which excludes volatile food and energy components, is forecast to increase 0.3% on the month and 3.1% YoY, in line with the prior readings.
• Along with the CPI data, markets will also watch the S&P Global preliminary Purchasing Managers Index (PMI) readings for October and the final University of Michigan (UoM) Consumer Sentiment Index, both due later on Friday.
• US-China trade headlines dominate markets after flaring up earlier this month following China's decision to expand export restrictions on rare earth materials. In response, President Donald Trump threatened to impose 100% tariffs on Chinese imports starting November 1, prompting tit-for-tat measures, including shipping and port fees on both sides.
• US Treasury Secretary Scott Bessent and US Trade Representative Jamieson Greer will meet with Chinese Vice Premier He Lifeng in Malaysia on Friday for high-level economic and trade discussions aimed at easing recent tensions.
• US-Canada trade tensions escalate. President Donald Trump announced on Thursday that the US is terminating all trade negotiations with Canada, citing a controversial ad aired by Ontario's provincial government. 

Technical analysis: XAU/USD weakens as sellers defend $4,150 resistance zone

XAU/USD is showing early signs of consolidation after a strong rally. The short-term outlook has turned bearish as the metal now trades below the 21, 50, and 100-period Simple Moving Averages (SMAs) on the 4-hour chart, signaling weakening bullish momentum.

On the downside, the $4,000 psychological mark remains a key support zone where dip buyers have been active in recent sessions. A decisive break below this area could trigger a deeper pullback toward the $3,900 region.

On the upside, the 100-SMA near $4,090 acts as immediate resistance, followed by $4,150. A sustained move above this zone would open the path toward the $4,200 level, where stronger selling pressure is likely to emerge unless bulls manage a clean breakout.