Investing.com - Gold prices have taken a breather from their recent rally to a new all-time high reached on Monday, oscillating within a range during Tuesday's Asian trading session. Despite the pause, the bullish outlook for the precious metal appears to remain intact.
The rally in gold prices, which saw them touch an all-time peak in the region of $2,265-2,266, has been halted due to increased confidence in the US economy. Monday's robust US manufacturing data has led to speculation that the Federal Reserve may not cut interest rates as many times as expected this year. This has resulted in higher US Treasury bond yields, strengthening the US dollar, which in turn has put pressure on the non-yielding gold.
However, market expectations still lean towards the Federal Reserve initiating a rate-cutting cycle in June. Coupled with the risk-averse sentiment and ongoing geopolitical tensions, particularly in the Middle East, these factors should help cushion any losses for the safe-haven gold. Before any significant corrective decline can be predicted, a strong selling follow-through would need to be observed.
Investors are now eyeing US macro data and speeches by numerous influential FOMC members for fresh market cues.
The US manufacturing sector's expansion in March, after 16 consecutive months of contraction, has led investors to scale back their expectations for a June rate cut by the Federal Reserve. This shift in expectations has driven the yield on the rate-sensitive two-year and the benchmark 10-year US government bonds to a two-week peak, putting some pressure on gold prices.
However, the surge in US Treasury bond yields, coupled with the risk of escalating geopolitical tensions in the Middle East, has curbed investors' appetite for riskier assets and supported the safe-haven gold.
Moreover, moderate inflation growth in February, as indicated by the US PCE Price Index, keeps hopes for a Fed rate cut alive, which should help limit the downside for gold.