Gold: Cypriot “no” leaves prices virtually unscathed
Gold is currently profiting from its status as a safe haven and climbed yesterday to a three-week high of $1,616 per troy ounce, where it is continuing to hold its own as trading gets underway this morning. In euro terms, the yellow precious metal increased to €1,257 per troy ounce – its highest level in 5½ weeks – partly on the back of the US dollar’s appreciation against the euro. The EUR-USD exchange rate has fallen to a four-month low. Yesterday evening saw the parliament in Cyprus reject the bailout programme negotiated with eurozone finance ministers, as had already started to become obvious by the afternoon. The Cypriot government will attempt to renegotiate the bailout package or to find other sources of finance. That said, there is little time left for renegotiations if the country’s bankruptcy is to be averted. Banks will also need to open their doors again soon, as economic activity is paralysed without unhindered payment transactions, and an economy can only bear such a situation for a short period of time. Gold should remain in demand until a solution can be found for Cyprus. Alongside Cyprus, market players are likely to be mainly focusing today on the interest rate decision to be taken by the US Federal Reserve. The subsequent press conference given by Fed Chairman Bernanke will be of particular interest, with market players keen to see whether he gives any initial indication of an exit from “QE3”.