Gold steady as Cyprus banks reopen calmly

LONDON — Gold held near $1,600 an ounce on Thursday, with investors cautious as banks reopened in Cyprus for the first time in two weeks after a stringent European Union (EU) rescue package to avert bankruptcy.

The metal was on track for a 1.3% gain in March, its first monthly rise in six, amid concern about the financial stability of the eurozone stoked by the crisis in Cyprus and a political deadlock in Italy after last month’s inconclusive elections.

But momentum was still lacking, and traders and analysts anticipated sideways trading ahead of the Easter holiday break.

Gold was down 0.3% to $1,600.01 an ounce by 12pm GMT, still below a one-month high of $1,616.36 hit last week.

US gold futures for April delivery dropped 0.2% to $1,602.60 an ounce. In euro terms, gold was headed for a monthly gain of 3.6%, its best monthly performance since July, having peaked to its highest since January 24 at 1,260.06 on Wednesday.

“With the Cyprus crisis unfolding we have seen gold crossing back above $1,600 but we haven’t tested the key technical resistance level at $1,620 as there wasn’t strong safe-haven inflows buying,” Credit Suisse global head of commodity research Tobias Merath said.

“We still don’t see any big impetus (from the Cyprus crisis) at the moment for gold to break in either direction … and we expect sideways trading around $1,600 as risk sentiment has not been retreating massively.”

The euro rebounded from earlier lows against the dollar and the yen, and European equities gained on news that Cypriots queued calmly at banks as they reopened under tight controls imposed on transactions to prevent a run on deposits.

Although European leaders said the bail-out, agreed in Brussels on Monday, averted a chaotic national bankruptcy that might have forced Cyprus out of the euro, the deal looks set to push the country deeper into an economic slump.

Reflecting the stalled momentum in gold, holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, were unchanged at 1,221.260 tonnes for the fourth session on March 27.

Fed support

Gold gained some support from comments of Federal Reserve’s top officials, reiterating that the central bank would do best to keep buying assets at its current $85bn-a-month pace until the jobs market is on firmer ground, a point that probably will not be reached until the end of the year.

Fears that central banks’ money-printing to buy assets will stoke inflation have been a key driver in boosting gold, sending prices to an 11-month high last October after the Fed announced its third round of aggressive economic stimulus.

The physical market was mostly subdued as jewellers and speculators stayed on the sidelines ahead of the Easter holiday, keeping premiums in Hong Kong and Singapore unchanged at between $1.20 and $1.50 an ounce to the spot London prices.

In other precious metals, spot silver lost 0.2% to $28.52 an ounce.

“Silver broke the long-term support line which was in place since 2009 (now at $29.80),” Société Générale said.

“The correction should therefore stretch to the previous year’s lows at $26.40/$26.05.”

Platinum fell 0.2% to $1,575.50, while palladium was down 0.4% to $755.72, having risen to a 10-day high of $768 in the previous session.

Reuters

Gold steady as Cyprus banks reopen calmly