Gold rallies 1% on safe-haven buying; Cyprus bailout in focus

Shutterstock photo - Gold futures traded at the highest levels of the session during U.S. morning hours on Monday, topping the psychologically-important USD1,600-an-ounce level as the precious metal regained its role as a safe-haven asset amid concerns over a controversial bailout plan for Cyprus.

Gold prices shrugged off a broadly stronger U.S. dollar, instead moving higher in tandem with the greenback. The dollar index was up 0.7% to trade at 82.91.

On the Comex division of the New York Mercantile Exchange, gold futures for April delivery traded at USD1,609.20 a troy ounce during U.S. morning trade, up 1% on the day.

Prices rose by as much as 1.1% earlier in the session to hit a daily high of USD1,610.00 a troy ounce, the strongest level since February 27.

Gold prices were likely to find support at USD1,560.60 a troy ounce, the low from March 8 and near-term resistance at USD1,614.40, the high from February 27.

Appetite for riskier assets, such as the euro and global stocks weakened broadly following news that a one-time tax was to be imposed on bank deposit holders as part of a EUR10 billion bailout deal for Cyprus.

In exchange for the rescue money, international creditors would impose a one-time tax of 6.75% on all bank deposits under EUR100,000 and 9.9% over that amount.

The agreement marked the first time since the onset of the euro zone debt crisis that depositors have been forced to take a haircut in return for financial aid and triggered a run on cash machines in Cyprus over the weekend.

Uncertainty over the rescue deal was underlined following reports that the government in Cyprus was preparing a new deposit tax proposal to lessen the impact on smaller depositors.

State media reported that a parliamentary vote on the levy was to be postponed until Tuesday, raising uncertainty over when banks in the country would reopen following a public holiday on Monday.

Gold traders also looked ahead to Wednesday's Federal Reserve policy statement, as investors try to assess the central bank's attitude towards aggressive monetary stimulus.

Moves in the gold price this year have largely tracked shifting expectations as to whether the Fed could bring quantitative easing to an end this year.

Fed Chairman Ben Bernanke is to give a press conference after the release of the policy statement.

Elsewhere on the Comex, silver for May delivery added 0.4% to trade at USD28.95 a troy ounce, while copper for May delivery plunged 2.3% to trade at USD3.439 a pound. - offers an extensive set of professional tools for the Forex, Commodities, Futures and the Stock Market including real-time data streaming, a comprehensive economic calendar, as well as financial news and technical & fundamental analysis by in-house experts.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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