Gold price hardly changed ahead of Fed meeting

Gold trading largely unchanged at around $1,180 per troy ounce today morning. Meeting of the US Federal Reserve and the subsequent press conference given by Fed Chair Yellen will attract market attention today. The Fed is not expected to increase interest rates this evening, for the data available so far do not show clearly that the economic weakness of the first quarter has been overcome, says Commerzbank. 

However, if Yellen were to indicate that two rate hikes will be made during the course of the year, this could cause the US dollar to appreciate noticeably and put pressure on the gold price. This is because the market has so far anticipated only one rate hike before the year is out. If two are on the cards, the low of $1,163 per troy ounce at the beginning of the month could be put to the test once again, and the gold price would then presumably fare better in euro terms, adds Commerzbank. 

As expected, the European Court of Justice ruled yesterday that the ECB's OMT programme (the unrestricted purchase of government bonds) is compatible with EU law. In other words, the purchases are not in violation of the ban on monetary state financing. The OMT programme serves as a safety net in the negotiations with Greece, as it is likely to prevent possible contagion effects in other peripheral countries, and thus reduce the impact on a potential Greek exit from the Eurozone. The gold price therefore did not react to the decision taken in Luxembourg.