* 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 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)
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