This Monday in European trading gold futures reached a three-week high. A problematic bailout plan for Cyprus brought back the concerns over the sovereign debt crisis of the Euro Zone. Therefore, the yellow metal earned back it safe haven appear supported by the debt turmoil.
During European trading hours on the Comex division of the New York Mercantile Exchange gold futures for delivery in April were up by 0.6% to trade at $1,602.50 per ounce.
Earlier in the session prices recorded a 0.9% jump. With this gold reached a daily high of $1,607.50 per ounce. This was the highest commodity price since 27th February.
In terms of technical analysis, gold is likely to find support at the $1,560.60 low from 8th March. The resistance is seen in the high from 27th February at $1,614.40 per ounce level.
During the past weekend, the International Monetary Fund and the European Union found a bailout consensus. An agreement on a 10 billion euro rescue plan for Cyprus was reached. International creditors will lend bailout money on one condition. All bank deposits less than 100,000 euro will be imposed by a one-time tax of 6.75%. The tax rate will by 9.9% over the 100,000 euro threshold.
Depositors have been forced make compromises in order to find financial support. This agreement placed a burden on depositors seen for the first time since the beginning of the debt crisis. In respect, cash frenzy started this Saturday in Cyprus. Hence a capital outflow from delicate European economies came as a serious concern.
Later on Monday, the Cyprus parliament will vote the proposed tax approval. Banks may stay closed on Tuesday if the vote is defeated. That way massive withdrawal will be prevented as the Monday public holiday is extended.
As respond to these developments investors avoided riskier assets like industrial commodities and stocks. Market players restored their interest into safe haven assets such as US Treasuries and gold.
Yellow metal traders are now focused on Federal Reserve policy statement to be announced on Wednesday. More light on the speculation of earlier-than-expected end to Fed’s asset buying program is expected.
So far in 2013, gold price movements have been following the Fed’s policy projections. Every speculation for quantitative easing end shifted the yellow metal direction. Therefore, investors are looking ahead of Wednesday’s statement.
