Investing.com - Gold prices rebounded during Tuesday's Asian trading session, recovering a portion of the previous day's modest losses.
The latest US macroeconomic data suggested easing inflation pressures, bolstering hopes for a potential rate cut by the Federal Reserve in September. This development provided some support to the non-yielding yellow metal. However, the commodity is still lacking strong bullish conviction, remaining within its week-long range below the 50-day simple moving average, indicating a need for caution from bullish traders.
Last week, the Fed adopted a more hawkish stance, with policymakers advocating for just one interest rate cut this year. This outlook supports elevated US Treasury bond yields, reviving demand for the US Dollar and likely limiting any substantial appreciation in gold prices. Moreover, a generally positive risk sentiment may also curb the appeal of the safe-haven precious metal. Therefore, robust follow-through buying is necessary to confirm that the recent pullback from the all-time high has ended.
The resurgence of some USD buying interest presents a challenge for gold prices on Tuesday. However, any significant decline seems unlikely due to expectations of two Fed rate cuts in 2024. The Fed's projection of only one interest rate cut this year, compared to the three projected in March, has allowed US bond yields to recover some of last week's losses, aiding the USD to regain positive traction.
These factors keep alive the possibility of a first Fed rate cut in September and another in December, calling for caution before positioning for a resumption of the commodity's recent pullback from its all-time peak. Investors now anticipate Tuesday's US economic data release - featuring retail sales and industrial production data - for short-term trading opportunities during the early North American session.
Furthermore, speeches from several influential Federal Open Market Committee (FOMC) members will significantly influence USD demand. This, coupled with broader risk sentiment, should provide some impetus to the precious metal.