Investing.com - Gold prices dropped in U.S. trading on Tuesday but remained range bound as investors in the precious metal applauded Cyprus's EUR10 billion bailout despite the losses the deal may inflict on larger bank depositors in the country.
Gold has served as the hedge of choice against a weakening euro during the Cypriot financial crisis, and while the bailout continues to generate uncertainty in the banking sector, investors sold gold on the notion that the eurozone remains intact for now.
On the Comex division of the New York Mercantile Exchange, gold futures for June delivery were down 0.54% at USD1,597.75 a troy ounce in U.S. trading on Tuesday, up from a session low of USD1,595.45 and down from a high of USD1,606.85 a troy ounce.
Gold futures were likely to test support USD1,590.85 a troy ounce, Monday's low, and resistance at USD1,614.40, Monday's high.
Investors in markets worldwide continued to digest Cyprus's EUR10 billion rescue package arranged by its European neighbors and the International Monetary Fund, which called for the closure of the country's second-largest lender, Laiki Bank.
The bailout deal guaranteed that accounts holding EUR100,000 or less will continue to be insured and likely shifted to another financial institution, though the fates of larger accounts remained up in the air, with depositors and bondholders facing heavy losses.
Eurogroup head Jeroen Dijsselbloem said terms of the rescue package may serve as a template for other European bailouts, which fanned fears at first that future financial lifelines may require similar banking-sector restructurings, though the Dutch Finance Minister later backtracked on that statement.
Still, investors sold their safe-haven gold positions on Tuesday on sentiments that Cyprus has avoided a default and messy exit from the eurozone, which could have punished the euro and further boosted gold's appeal as a hedge to weakening paper currencies.
Mixed data hitting the wire in the U.S. also pushed gold down by stoking hopes that the Federal Reserve will soon consider winding down monetary stimulus programs that weaken the greenback by design.
The U.S. Census Bureau reported earlier that core durable goods orders fell 0.5% in February from January, defying expectations for a 0.5% rise and well below a 2.9% increase the previous month.
However, overall durable goods orders, which include transportation items, jumped up 5.7% last month, well beyond market calls for a 3.8% increase, following a 3.8% decline in January, which sent oil prices rising despite spotty consumer confidence data.
The Conference Board reported earlier that its index of consumer confidence fell unexpectedly in March, dropping to 59.7 from February's 68.0 reading.
Analysts were expecting the index to remain unchanged in March.
Meanwhile, the U.S. Census Bureau reported that new home sales in the U.S. came in at 411,000 in February, missing expectations for a gain of 422,000 units sold and well below a 431,000 rise in January.
Home prices, a key cause for the country's sluggish recovery, continue to improve.
The Standard & Poor's/Case Shiller composite 20-city home price index rose by 8.1% in January after gaining 6.8% in December, beating expectations for a rise by 7.9%.
Elsewhere on the Comex, silver for May delivery was down 0.36% at USD28.710 a troy ounce, while copper for May delivery was up 0.26% and trading at USD3.454 a pound.
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