Cyprus uncertainty, FOMC meeting are influencing gold prices this week.
By Myra P. Saefong and V. Phani Kumar, MarketWatch
SAN FRANCISCO (MarketWatch) — Gold futures fell Wednesday, taking a break after a four-session climb, with investors pondering the next moves for the Federal Reserve, which will issue a policy statement later in the day, and Cyprus, which has rejected terms for a bailout.
April futures for gold GCJ3 -0.24% shed $3.20, or 0.2%, to $1,608.10 an ounce on the Comex division of the New York Mercantile Exchange. Prices had climbed 0.4% on Tuesday to $1,611.30, the highest settlement since Feb. 26.
Two factors are influencing gold this week: Cyprus and the Federal Reserve’s Open Market Committee meeting, said Jeffrey Wright, managing director at Global Hunter Securities.
“What is going on in Cyprus and does this spread to much larger and impactful countries like Italy, Spain, or Portugal?” said Wright. “If so, then safe-haven demand for physical gold could pick up in Europe, quickly. The euro could weaken but also strengthen gold at the same time.”
Late Tuesday, the Cyprus parliament rejected a bailout proposal, which included a controversial deposit tax, leaving plans to short up the country’s banking sector in disarray. Read: What could happen next in Cyprus.
Though the Cyprus bailout proposal was rejected, “the damage has been done,” said Julian Phillips, contributor to and founder of GoldForecaster.com. “Deposits are not safe from confiscation or safe in insolvency. [European Union] banking integrity has been dealt a heavy body blow.”
“We see this as having a very positive impact on the demand for gold and silver in the days ahead,” he said in a daily note.
At last check, the euro climbed against the U.S. dollar, regaining some of the ground it lost in recent days. The ICE dollar index DXY -0.37% , which measures the greenback against a basket of six major global currencies, fell to 82.591 from 82.893 in North America late on Tuesday.
In the U.S., a two-day FOMC meeting will wrap up with a press conference hosted by Fed Chairman Ben Bernanke.
“We are looking for signs of either continued [quantitative-easing] purchasing or is the party coming to an end?” said Wright of Global Hunter Securities.
Gold is often seen as a hedge against inflation so it has benefitted from the Fed’s easy monetary policy.
Among other metals, May futures for silver SIK3 -0.15% declined by 3 cents, or 0.1% to $28.81 an ounce, tracking gold prices lower.
May copper HGK3 +1.06% added 3 cents, or 0.9%, to $3.44 a pound.
The April contract for platinum PLJ3 +1.16% rose $12, or 0.8%, to $1,567.40 an ounce, while June futures for palladium PAM3 +2.11% advanced $13.65, or 1.9%, to $748.85 an ounce, with both contracts looking to recoup the sizable losses they saw in the previous session.
Myra Saefong is a MarketWatch reporter based in San Francisco. Follow her on Twitter @MktwSaefong.
Varahabhotla Phani Kumar is a reporter in MarketWatch's Hong Kong bureau. Follow him on Twitter @MktwKumar.
