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.