Bailout plan for Cyprus generates uncertaintyby Co
by homment | 18.03.2013 | Views: 6
Bailout plan for Cyprus generates uncertainty
Gold has gained nearly 1% as the new week begins and for the first time since the end of February has exceeded the $1,600 per troy ounce mark again. In euro terms, the price increase is even greater at +2%, which is attributable to the appreciation of the US dollar against the euro. At a good €1,240 per troy ounce, the yellow precious metal is trading this morning at a five-week high. Gold is thus living up to its status as a safe haven, after the decision about Cyprus taken by the eurozone finance ministers gave rise to considerable uncertainty on the financial markets. At the weekend, the finance ministers had decided on the basic outline for a bailout programme for the Mediterranean country. For the first time, holders of bank deposits will have to shoulder a part of the costs of the bailout. However, it is not yet certain whether the Cypriot parliament, with its very slim governing majority, will approve the law on taxing bank deposits today, yet this is a prerequisite for the bailout package. Gold should profit from the possibility that savings are no longer regarded as safe, and should thus enjoy strong demand in the current market environment. We therefore expect to see prices continuing to rise. The headwind from speculative financial investors has abated noticeably of late: they once again expanded their net long positions by nearly 8% to 44.3 thousand contracts in the week to 12 March. If sentiment amongst money managers should continue to brighten, this could contribute to higher gold prices.