Gold prices rose above $1,600 for the first time in more than two weeks, as concern that Europe’s debt crisis will escalate increased the appeal of the metal as a haven.
European officials agreed to support Cyprus with a $10 billion aid package, but the package calls for a tax on depositors, at 9.9% for depositors with over 100,000 euros and 6.7% for those with deposits of less than 100,000 euros.
Joni Teves, precious metals analyst at UBS, said the renewed risks from the eurozone may highlight gold’s safe-haven properties for investors :
“As people start to worry about the safety of their deposits, gold would become an attractive alternative and an escalation of these worries would prompt a return of fear-related physical buying. With gold’s correlation with risk and the euro currently in negative territory, the yellow metal looks well positioned to rally on the back of recent eurozone developments”.
A vote by the Cypriot parliament on the tax was postponed until tomorrow. European policy makers signaled flexibility on the application of the unprecedented levy. A poll showed 71 percent of Cypriots said that the government should reject the proposal, and people lined up at cash machines to withdraw funds. Banks there are temporarily closed.