Gold extends its decline as investors take profits ahead of upcoming US inflation data.

Credit: Reuters

Oct 22 (Reuters) - Gold prices fell on Wednesday to a near two-week low, following their sharpest single-day drop in five years in the previous session, as investors booked profits ahead of key U.S. inflation data due this week.

Spot gold was down 1.7% at $4,054.34 per ounce, as of 01:42 p.m. ET (1742 GMT), after rising to as much as $4,161.17 earlier in the session.

U.S. gold futures for December settled 1.1% lower at $4,065.40 per ounce.

Gold prices have notched multiple record highs and gained 57% this year, bolstered by geopolitical tensions, economic uncertainty, expectations of U.S. rate cuts and strong inflows into ETFs. Prices fell 5.3% on Tuesday, after notching a record high of $4,381.21 in the preceding session.

"Given the aggressive move to the upside over the course of the last several weeks, it's not completely surprising to us to see a bit of profit taking ahead of the CPI report on Friday," said David Meger, director of metals trading at High Ridge Futures.

On the technical front, gold is supported by the 21-day moving average at $4,005.

Friday's U.S. Consumer Price Index (CPI) report, delayed due to the ongoing U.S. government shutdown, is expected to show that core inflation held at 3.1% in September.

Investors have nearly fully priced in a 25-basis-point rate cut at the U.S. Federal Reserve's meeting next week. FEDWATCH

Gold, a non-yielding asset, tends to benefit in low-interest rate environments.

Meanwhile, Russia said on Wednesday that it was still preparing for a potential summit between President Vladimir Putin and U.S. President Donald Trump.

Investors are also awaiting clarity on next week's potential meeting between Trump and Chinese President Xi Jinping.

"We maintain a bullish outlook for gold and silver into 2026, and following a much-needed correction/consolidation, traders will likely pause for thought before concluding the developments that drove the historic rallies this year has not gone away," said Ole Hansen, head of commodity strategy at Saxo Bank, in a note.

Among other metals, spot silver dropped 1.6% to $47.95 per ounce. It slipped 7.1% on Tuesday.

Platinum gained 4.5% to $1,620.83, while palladium rose 0.1% to $1,409.80.

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