The gold price kicked off the week on a softer note after traders trimmed their bets of an interest rate cut by the US Federal Reserve in the coming months. According to analysts at FXStreet, gold drifted lower by breaking a two-day winning run as focus shifted to signals from leading central banks. 

Their detailed article explained that gold had rallied off recent lows in the past week as markets priced in a higher probability of the Fed enacting an accommodative policy response to signs of economic weakness. However, data released last Friday painted a brighter picture of the US economy, dampening expectations for a hawkish pivot in March. 

The University of Michigan’s preliminary survey showed consumer sentiment climbed much higher than forecast in January, reaching its strongest level since mid-2021. This real-world indicator, together with various Fed officials’ recent remarks expressing satisfaction with current policy settings, contributed to investors scaling back rate-cut wagers for the March meeting. 

Gold typically gains when lower rates are anticipated as it decreases the opportunity cost of holding the non-yielding metal. But with the Fed now seen as less likely to cut so soon, safe-haven demand eased and prices dipped as a result. The article noted market-implied odds for a March move fell below 50% according to the CME’s FedWatch tool versus above 70% previously. 

Further weighing on gold was improved risk appetite in equity markets, which was boosted by ongoing optimism around corporate earnings season. Firming stock prices encouraged some selling pressure on haven assets. Geopolitical tensions and fears of a global growth slowdown provided only limited support to bullion.

From a technical perspective, FXStreet analysts warned that a sustained break below nearby support levels at $2,022-2,020 could expose the psychologically important $2,000 level. This area proved pivotal late last year and may again spark volatile swings. On the upside, resistance was seen at the $2,040-42 region, with a move above needed to spark short-covering momentum bets.

In summary, gold was pressured at the start of the week due to reduced Fed rate cut wagers following upbeat US economic data and comments from various Fed officials. The metal now faces a key support test that may shape near-term outlook, leaving prices exposed to swings on any new macro developments or geopolitical headlines. Traders seemingly remain focused on central bank signals for guidance after discounting an earlier policy shift.