* Gold off early lows but rally loses momentum
* US gold futures volume set to hit highest since November
* Eurogroup chief comments stir European banking fears
* Coming up: US durable goods, Case-Schiller housing Tuesday
(New updates throughout, changes byline, dateline, pvs LONDON)
By Frank Tang
NEW YORK, March 25 Gold fell in heavy trade on
Monday as a bailout deal to avert a collapse of Cyprus' banking
system and possible economic chaos in the euro zone decreased
the metal's safe-haven appeal.
The metal sharply pared losses after comments by Jeroen
Dijsselbloem, who heads the Eurogroup of euro zone finance
ministers, dealt a blow to investor confidence in the European
banking sector. Hopes of prolonged Federal Reserve stimulus also
lifted gold off its lows.
However, bullion's rally lost momentum as it failed to break
above its recent high at around $1,615 an ounce. Selling
pressure related to Monday's COMEX April option expiration also
weighed on prices, traders said.
"We would have thought that by now gold would be materially
stronger than it is, raising our thought that a market that does
not go up on bullish news may not be bullish after all," said
Dennis Gartman, a veteran trader and publisher of his namesake
Gold, a traditional safe haven, had in the past benefited
from euro zone debt fears. The metal is down 4 percent so far
this year as a steadier global economic outlook and no signs of
inflation anytime soon lessened bullion demand.
Spot gold was down 0.2 percent at $1,603.96 an ounce
by 3:16 p.m. EDT (1916 GMT), having earlier traded as low as
$1,589.49, which marked a one-week low.
U.S. gold futures for April delivery settled down
$1.60 at $1,604.50 an ounce.
Trading volume was around 325,000 lots, set to be the
busiest session since late November, preliminary Reuters data
Monday's turnover was nearly 70 percent above its 250-day
average, boosted by heavier investor interest due to the Cyprus
economic crisis and COMEX option expiration, traders said.
CYPRUS IN FOCUS
Gold, which rose to a near one-month high last week,
retreated after Cyprus reached a last-ditch deal with
international lenders on a 10 billion euro ($13 billion) rescue,
and in exchange agreed to close down its second-largest bank and
inflict heavy losses on big depositors.
The rescue program specifies that insured deposits - those
below 100,000 euros - move to the Bank of Cyprus, the country's
largest lender. Uninsured deposits, those accounts with more
than 100,000 euros, face losses of 4.2 billion euros.
Market fears lifted gold off its lows after the Eurogroup's
Dijsselbloem said the Cyprus bailout represents a new template
for resolving euro zone banking problems and other countries
which may have to restructure their banking sectors.
Gold hit a record high of around $1,920 in September 2011,
when a worsening debt crisis in Europe sparked a rush into the
Comments from influential New York Fed President William
Dudley also underpinned gold. Dudley said that the U.S. central
bank must remain very accommodative because the labor market
remains far from healthy despite some recent improvement in the
Among other precious metals, spot silver rose 0.5
percent to $28.82. Platinum edged up 74 cents at
$1,580.24, while palladium fell 0.4 percent to $754.50 an
3:16 PM EST LAST/ NET PCT LOW HIGH CURRENT
SETTLE CHNG CHNG VOL
US Gold APR 1604.50 -1.60 -0.1 1588.40 1612.80 217,475
US Silver MAY 28.815 0.117 0.4 28.460 28.890 32,602
US Plat APR 1582.90 1.20 0.1 1573.10 1589.40 15,325
US Pall JUN 757.35 -4.20 -0.6 755.55 766.00 2,387
Gold 1603.96 -3.99 -0.2 1589.49 1613.26
Silver 28.820 0.150 0.5 28.510 28.900
Platinum 1580.24 0.74 0.0 1575.00 1587.00
Palladium 754.50 -3.35 -0.4 757.50 763.00
TOTAL MARKET VOLUME 30-D ATM VOLATILITY
CURRENT 30D AVG 250D AVG CURRENT CHG
US Gold 325,597 193,659 175,283 12.89 0.03
US Silver 38,182 58,955 52,132 19.1 0.19
US Platinum 27,320 14,813 11,125 15.47 0.01
US Palladium 2,390 8,099 5,248
(Additional reporting by Clara Denina in Londona and Lewa
Pardomuan in Singapore; Editing by Veronica Brown, William Hardy
and Chizu Nomiyama)