IV:Gold fluctuates in rangebound trade as Cyprus deal weakens dollar
Investing.com - Gold futures swung between modest gains and losses during early European trade on Monday, as the U.S. dollar weakened following news that Cyprus and its international lenders reached a last-minute bailout agreement.
Relief over the Cyprus deal prompted investors to shed safe haven assets, such as gold and the U.S. dollar, and move in to riskier assets like stocks and industrial commodities.
On the Comex division of the New York Mercantile Exchange, gold futures for April delivery traded at USD1,607.85 a troy ounce during European morning trade, nearly flat on the day.
Prices held in a tight USD10-trading range between USD1,603.95 a troy ounce, the daily low and a session high of USD1,614.40. Comex gold prices rose to a three-week high of USD1,615.80 a troy ounce on March 21.
Gold prices were likely to find support at USD1,575.80 a troy ounce, the low from March 14 and near-term resistance at USD1,619.40, the high from February 26.
European finance ministers approved a EUR10 billion bailout plan for Cyprus just hours before a deadline, easing fears over a collapse of the island’s banking sector.
The European Central Bank said last week that it will cut off liquidity to Cypriot banks on Monday if an agreement with the European Union and the International Monetary Fund on a bailout solution is not in place.
Under the bailout deal, the island's second largest bank, Laiki Bank, will be restructured and holders of bank deposits of more than EUR100,000 will be subject to significant losses.
Depositors holding less than EUR100,000 in their bank accounts will be protected from any deposit taxes.
A previous bailout proposal that included a levy on all deposits in Cypriot banks was rejected by the country's parliament last week, sparking fears the island could leave the euro zone.
The dollar index, which tracks the performance of the greenback against a basket of six other major currencies, was down 0.15% to trade at 82.39.
Dollar weakness usually benefits gold, as it boosts the metal's appeal as an alternative asset and makes dollar-priced commodities cheaper for holders of other currencies.
Gold traders were looking ahead to a speech by Federal Reserve Chairman Ben Bernanke later in the trading day.
Last week, the U.S. central bank announced that it will leave monetary policy unchanged in spite of recent signs that the U.S. recovery is gaining traction.
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.
Elsewhere on the Comex, silver for May delivery added 0.3% to trade at USD28.78 a troy ounce, while copper for May delivery dipped 0.2% to trade at USD3.466 a pound.
