GOLD prices rose above $1,600/oz (€1,235/oz) for the first time in more than two weeks, as the metal drew some safe haven appeal after a bailout for Cyprus, including a levy on bank deposits, rattled international financial markets.
Euro zone finance ministers want Cypriots with deposits of over 100,000 euros ($128,950) to fork out 9.9 percent of their savings while those with less than a hundred thousand euros will be hit with a 6.75 percent levy in order to raise 5.8 billion euros, so that the country is eligible for an international bailout. Investors are concerned that taxing depositors will set a dangerous precedent for the euro zone and ultimately risk runs on regional banks.
This uncertainty could provide a brand new support for gold for days or even weeks.
Price expects the precious metal to trade in a range of $1,600-$1,700 in the coming weeks.
Analysts at Commerzbank said in a note that 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,” they said.
“Wealth preservation is now absolutely critical. This involves eliminating counterparty risk whenever possible. EverythIng within the banking system has counterparty risk even if it is segregated or allocated. Investors must hold physical precious metals and they must be stored outside the banking system.” said Egon von Greyerz in his latest article.