Gold Advances Above $1,600 for First Time This Month on Cyprus

By Nicholas Larkin & Glenys Sim 

Gold rose above $1,600 an ounce in New York for the first time this month after an unprecedented levy on bank deposits in Cyprus increased demand for a protection of wealth.

Cypriot President Nicos Anastasiades bowed to demands by euro-area finance ministers to raise 5.8 billion euros ($7.5 billion) by taking a piece of bank accounts in Cyprus. Finance officials said easing the cost to smaller savers was up to Cyprus, which became in June the fifth euro-area nation to request a rescue. The euro fell to the lowest since December versus the dollar and global equities declined.

“Gold looks poised to benefit from its safe-haven properties amid renewed risks coming out of the euro zone,” Joni Teves, an analyst at UBS AG in London, wrote today in a report. “As people start to worry about the safety of their deposits, gold would become an attractive alternative and an escalation of these worries would prompt a return of fear- related physical buying.”

Gold futures for April delivery rose 0.6 percent to $1,602.60 an ounce by 7:52 a.m. on the Comex in New York. Prices reached $1,607.60, the highest since Feb. 27, and added 1 percent last week. Futures trading volume was 39 percent above the average in the past 100 days for this time of day. Gold for immediate delivery gained 0.7 percent at $1,603.49 in London.

The Cypriot levy enabled the euro area to lower its bailout of the country to 10 billion euros from an original figure of about 17 billion euros. A vote on the tax was postponed until tomorrow.

ETP Holdings

While gold had the first back-to-back weekly gain last week since January, holdings inexchange-traded products fell to 2,469.8 metric tons on March 15, the lowest since September, data compiled by Bloomberg show. Prices are down 4.4 percent this year after 12 straight annual gains.

“The deposit levy plan in Cyprus may be the spark that gold needed to overcome its recent weakness,” Mark O’Byrne, the executive director of Dublin-based GoldCore Ltd., a brokerage that sells and stores bullion coins and bars, said today in an e-mail. “The move shows the importance of being diversified and again highlights gold’s role as a safe haven asset in uncertain times.”

Silver for May delivery lost 0.1 percent to $28.81 an ounce. Palladium for June delivery was down 1.7 percent at $762.50 an ounce. Platinum for April delivery dropped 0.8 percent to $1,580.40 an ounce. One ounce of platinum bought as little as 0.9816 ounce of gold in Londontoday, the least since Jan. 14, data compiled by Bloomberg show.

To contact the reporters for this story: Nicholas Larkin in London at nlarkin1@bloomberg.net; Glenys Sim in Singapore at gsim4@bloomberg.net

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