PRECIOUS-Gold holds firm after Cyprus parliament rejects tax

Wed Mar 20, 2013 2:04am IST

* Gold eases off 3-wk high at $1,615.16/oz after Cyprus vote
    * SPDR Gold Trust posts biggest daily loss in nearly a month
    * European car sales drop 10 pct in February, hurting
platinum
    * Coming up: FOMC policy statement, Bernanke press
conference Wed.

 (Updates with closing prices, releads, adds Cyprus vote,
rewrites throughout, changes byline, dateline)
    By Carole Vaporean
    NEW YORK, March 19 (Reuters) - Gold stayed strong on
Tuesday, but eased off earlier 3-week highs above $1,615 an
ounce after Cyprus' parliament rejected a tax on bank deposits
which cast doubt on the country's bailout package, affirming a
need for flight-to-safety buying.
    Cypriot lawmakers overwhelmingly rejected a deeply unpopular
plan to tax bank deposits on Tuesday, throwing into doubt an
international bailout for the troubled euro zone member needed
to avert default and a banking collapse. 
    Gold edged off its highs just after vote, but the lingering
uncertainty surrounding Europe's financial stability should keep
prices supported.
    "They rejected this version of the plan, but presumably
there will be something else forthcoming. So, the genie is still
out of the box in that your bank account is not necessarily
secure and that is broadly supportive of gold," said Peter
Buchanan, commodity analyst at CIBC World Markets, Toronto.
    Spot gold held onto gains of 0.44 percent at
$1,611.90 an ounce by 1540 EDT/1940 GMT, but pulled off its
highest levels since Feb. 26 at $1,615.16 an ounce reached
before the Cypriot vote was cast.
    U.S. gold futures for April delivery settled $6.70 an
ounce higher at $1,611.30, but was quoted at $1,609.50 in after
hours trade following the vote. In euro terms, gold
rose to its highest since Feb. 07 at 1,256.50 in early trade. 
    The euro zone proposal, unveiled at the weekend, to
partially fund a bailout of the island by taxing bank deposits
rattled financial markets and pushed risk averse investors into
gold as a safe haven and kept them there following the vote.
    "If you're worried about the value of your savings account
and whether someone's going to pare it unilaterally that makes
gold more appealing. We do know some of those accounts are held
by people who might well consider gold as an alternative
investment," said Buchanan. 
    Cyprus' financial troubles should provide gold an
underpinning, aided by the euro's bounce after the news. The
euro cut its losses against the dollar in late afternoon trade,
following comments that the European Central Bank took note of
the Cyprus vote and that it reaffirmed its commitment to provide
liquidity as needed within its rules. 
    Gold tends to benefit from rising risk aversion if investors
choose the metal as a safe store of value, it has also moved
closely in line with stocks and the euro this year.
    
    
   
    INVESTMENT INTEREST MUTED
    Some investors also held onto gold in anticipation of
Wednesday's policy statement from the Federal Reserve's Open
Market Committee. They will also be anxiously watching Fed
Chairman Ben Bernanke's press conference after the meeting,
which could affect prices if he even hints at a policy shift. 
    Speculation that the Fed could withdraw from its monetary
easing policy known as quantitative easing, or QE, sooner than
expected has pressured gold this year. 
    HSBC said in a note that it expects the FOMC to reaffirm its
commitment to its easy policy, "and to offer no hint that it
will alter the policy in the near term." It added, however, that
the FOMC "may decide to update its strategy principles of how to
'exit' from QE at the coming meeting.
    Selling from gold-backed exchange-traded funds continued on
Monday, with the largest, New York's SPDR Gold, reporting
its biggest outflow in nearly a month, of 13.5 tonnes. That
brought its total outflow this year to 131 tonnes. 
    Silver also reversed earlier losses and was nearly
even at $28.85 an ounce. Platinum was down 1.6 percent at
$1,552.25 an ounce and palladium was off 4.0 percent at
$731.75 an ounce.
   Platinum, chiefly used in autocatalysts, has traded at a
discount to gold for much of the last year, but reversed that
trend in the first quarter on growing optimism that steadier
global growth would translate into a demand recovery.
    However, car makers struggled in Europe, a key market for
platinum-heavy diesel catalysts. Europe's car market shrank 10.2
percent in February, with sales of new vehicles falling to
829,359, according to figures from the Association of European
Car Manufacturers.     

 2:53 PM EDT     LAST/    NET   PCT      LOW    HIGH  CURRENT
                SETTLE   CHNG  CHNG                       VOL
 US Gold APR   1611.30   6.70   0.4  1599.00 1615.00  149,614
 US Silver MAY  28.843 -0.031  -0.1   28.620  29.090   30,785
 US Plat APR   1555.40 -23.80  -1.5  1549.80 1584.90   20,989
 US Pall JUN    735.20 -29.65  -3.9   727.30  766.65    8,239
                                                              
 Gold          1610.85   6.05   0.4  1600.75 1615.16         
 Silver         28.850  0.010   0.0   28.680  29.080
 Platinum      1552.25 -24.50  -1.6  1552.50 1583.00
 Palladium      731.75 -30.75  -4.0   729.77  763.50
                                                              
 TOTAL MARKET              VOLUME          30-D ATM VOLATILITY
                CURRENT   30D AVG  250D AVG   CURRENT     CHG
 US Gold        184,857             174,963     13.66   -0.10
 US Silver       32,779              52,746     20.92   -1.06
 US Platinum     30,117              10,829     18.03    0.14
 US Palladium     8,335               5,242                  
                                                              
 

 (Additional reporting by Clara Denina and Jan Harvey; Editing
by Keiron Henderson, Grant McCool and Gunna Dickson)

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