PRECIOUS-Gold holds near 3-week high on Cyprus crisis

Wed Mar 20, 2013 7:22am GMT

* Cyprus scare supports gold's safe-haven appeal
    * Spot gold may rise to $1,626/oz - technicals
    * Coming up: U.S. Fed policy decision; 1800 GMT

 (Adds comments; updates prices)
    By Rujun Shen
    SINGAPORE, March 20 (Reuters) - Gold held steady near a
three-week high on Wednesday as Cyprus' rejection of bailout
terms rekindled worries about the stability of the euro zone,
boosting bullion's safe-haven appeal.
    Cyprus's parliament overwhelmingly rejected a proposed levy
on bank deposits as a condition for a European bailout on
Tuesday, throwing international efforts to rescue the latest
casualty of the euro zone debt crisis into disarray. 
    The threat of a default or even expulsion of Cyprus from the
euro zone drove nervous investors to seek refuge in gold, though
such support may not last long.  
    "Given the relatively small sum involved compared to the
previous debt financing schemes that were put together for the
Greeks and others, Cyprus is a manageable problem and one that
we think will eventually get resolved," said Ed Meir, an analyst
at INTL FCStone, in a research note.
    Supportive of gold prices, holdings of SPDR Gold Trust
, the world's largest gold-backed exchange-traded fund,
rose 2.708 tonnes to 1,222.162 tonnes on Tuesday, the first
increase in daily holdings since early February.
    Spot gold traded flat at $1,612.71 an ounce by 0647
GMT, near a three-week high of $1,615.16 hit on Tuesday. 
    U.S. gold was also little changed at $1,612.10.
    Technical analysis was bullish. Spot gold could rise to
$1,626 as it has cleared a resistance at $1,611, said Reuters
market analyst Wang Tao. 
    
    But the rise in spot gold prices for six out of the past
seven sessions has dented demand in Asia's physical markets,
where buying slowed from earlier in the month.
    Buyers are now waiting for prices to return to lower levels
when the situation in Cyprus calms down.
    "Gold buying from China is slower from a few weeks ago, and
people are selling in Shanghai to take profit," said Peter Fung,
head of dealing at Wing Fung Precious Metals in Hong Kong.
    "The upside is still limited. After people calm down, they
will still invest in other assets."
    Upbeat U.S. economic data in recent months has encouraged
investors to pile money into the stock market, helping the S&P
500 index climb more than 8 percent so far this year.
Gold, in comparison, is down nearly 4 percent since Dec. 31.
    Investors will be closely watching the outcome of the
Federal Reserve's two-day meeting on Wednesday, as well as a
press conference by Fed Chairman Ben Bernanke. Any hint of
tightening monetary policy would add to headwinds for gold.
 
    "Uncertainty and sense of fear will keep gold supported, but
whether gold will fly is another story all together," said
Mingze Wu, market specialist at OANDA in Singapore. 
    "It's a tug of war between fear that drives gold up and lack
of fear that pulls gold down."
    Spot platinum inched up 0.2 percent to $1,556.74, off
a more than two-month low of $1,545.25 hit on Tuesday.
    Spot palladium rose 0.2 percent to $734.50, after
tumbling 3.9 percent in the previous session, the sharpest
one-day decline in nearly five months.    

      Precious metals prices 0647 GMT
  Metal             Last    Change  Pct chg  YTD pct chg    Volume
  Spot Gold        1612.71   -0.08   -0.00     -3.69
  Spot Silver        28.94    0.07   +0.24     -4.43
  Spot Platinum    1556.74    3.24   +0.21      1.42
  Spot Palladium    734.50    1.50   +0.20      6.14
  COMEX GOLD APR3  1612.10    0.80   +0.05     -3.80        10040
  COMEX SILVER MAY3  28.93    0.09   +0.30     -4.30         1985
  Euro/Dollar       1.2883
  Dollar/Yen         95.11
  COMEX gold and silver contracts show the most active months 
 

 (Editing by Himani Sarkar)