Gold (XAU/USD) saw some dip-buying during the European session on Tuesday, recovering part of the previous day’s modest losses. The move was bolstered by incoming US macroeconomic data indicating that inflationary pressures are easing, which has sustained hopes for a potential rate cut by the Federal Reserve (Fed) in September. This lent some support to the non-yielding yellow metal. However, gold lacks bullish conviction and remains trapped in a one-week-old range below the 50-day Simple Moving Average (SMA), urging caution among bullish traders.
Despite this, the Fed’s recent hawkish stance remains a significant factor. Policymakers have maintained that only one interest rate cut is likely this year. This outlook supports elevated US Treasury bond yields, which in turn boosts demand for the US Dollar (USD), potentially limiting any substantial appreciation in gold prices.
Additionally, a generally positive risk sentiment may also cap gains for the safe-haven asset. Therefore, robust follow-through buying is necessary to confirm that the recent pullback from the all-time high has concluded.
