Gold: pressure building ahead of Fed rate decision

Gold volatility is slowing, and tension building as the Fed announcement gets closer.

Despite the historic announcement from the Bank of Japan's to end its negative interest rates policy and the Reserve Bank of Australia maintaining steady rates, gold has remained relatively stable.

However, with gold being priced in US dollars, all eyes are on the Federal Reserve's interest rate decision scheduled for Wednesday.

While no rate cut is expected this month, traders will be looking for news on a June cut. The likelihood of a 25-basis-point rate cut in June has decreased by more than 20% recently, and now stands at about 50%.

Beyond the rate decision announcement, traders are particularly interested in the 'dot plot,' which shows individual FOMC members' interest rate forecasts. Should the central bankers maintain the 'dots' relatively unchanged, it could bode well for gold, especially considering the ongoing inflationary pressures indicated by recent CPI and PPI data have some analyst thinking that June is too soon for the Fed to be comfortable with a cut.

Gold continues to trade significantly above its 100- and 200-day moving averages. However, the 50-day moving average is possibly suggesting a limit to its short-term bullish momentum.

Meanwhile, the benchmark 10-year US Treasury bond yield remains stable above 4.3% in anticipation of the Federal Reserve event, preventing XAU/USD from gaining traction for now.