* Cyprus bailout proposal weakens euro, equities
* Some dealers say rally may soon end
* Euro zone finmins to hold teleconference at 1830 GMT
* Cypriot parliament vote on bailout due on Tuesday (Updates prices, adds NEW YORK dateline, comment in paras 11-13 and 16)
By Clara Denina
NEW YORK/LONDON, March 18 (Reuters) - Gold prices hit their highest level since late February, with some investors drawn to the precious metal’s safe haven properties as a radical bailout package for Cyprus shook sentiment in the euro zone.
The euro zone agreed on Saturday to hand Cyprus a bailout worth 10 billion euros ($13 billion), but required depositors to forfeit up to 10 percent of their savings, shaking confidence in banks across the continent.
Spot gold gained 1.2 percent to a fresh high since Feb 27 at $1,610.81 an ounce and was at up $12.80, or 0.80 percent, at $1,604.64 an ounce at 2:01 p.m. EDT (1802 GMT).
U.S. gold futures for April delivery also hit a 2-1/2-week high, at $1,610.40 an ounce. They settled at $1,604 per ounce, up 0.75 percent from Friday.
Societe Generale analyst Robin Bhar said the U.S. market openings gave a further push higher to gold.
“There is a bit of a flood into safe havens,” he said. “But whether that will last or not, it’s still early to say... all the evidence we have now suggests gold shouldn’t rally a lot further from here.”
Analysts remained cautious as the details of the bailout were still to be unveiled while the market awaited a Cypriot parliament vote on the measure on Tuesday and worried that depositors elsewhere in the euro zone might face levies.
Euro zone finance ministers will talk on a teleconference call at 1830 GMT.
Gold’s safe-haven appeal had tailed off dramatically in the past few months, with prices losing 3.2 percent since the start of the year, as investors grew more confident of economic recovery and moved towards assets perceived as higher risk like equities.
A series of positive economic data out of the United States and China and a stabilisation in the euro zone also raised speculation that main central banks could turn off liquidity taps and stop pumping cash into the economies.
Less accommodative monetary policies would hurt gold, because higher interest rates encourage investors to take money out of non-interest-bearing assets.
Some dealers said the rally may soon run out of steam unless signs emerged that contagion was spreading from the small European island and into the euro zone.
“It’s given a little bid to the market, (but) I don’t think we’ll hold,” said Frank McGhee, head precious metals trader at Integrated Brokerage Services LLC.
“I think you’ll see a continued improvement in the U.S. economy over the next three to six months and that will keep gold under pressure.”
Gold priced in euros rose 1.7 percent to a five-week high at 1,246.23 euros/oz, mostly gaining from the euro weakness against the dollar.
The single currency was flat against the dollar, having dropped as low as $1.2882 in the Asian session. Meanwhile, global stock markets also fell as investors took the opportunity to lock in profits after an extended rally last week.
Pulling out of riskier commodities, including metals and oil, traders also piled into U.S. Treasuries, which are also considered a safe haven.
The next macro event is a U.S. Federal Reserve policy meeting on Tuesday and Wednesday, which is expected to give clues on the central bank’s attitude towards aggressive monetary stimulus. Economists expected the Fed to keep buying bonds for the rest of the year to aid the still frail economic recovery.
Speculators raised net long positions in U.S. gold in the week to March 12 from a more than five-year low of 39,631 contracts to 43,195 contracts, but also increased short bets on bullion, data from U.S. Commodity Futures Trading Commission showed.
But interest in exchange-traded gold funds remained lukewarm on Friday. Holdings of SPDR Gold Trust, the world’s biggest gold ETF, resumed the decline after a two-day pause, down 3.311 tonnes to 1,232.996 tonnes, the lowest since October 2011.
Spot silver rose 0.84 percent to $28.91 an ounce.
Platinum was down 0.74 percent at $1,576.24. The metal has returned to trade at a discount to gold on worries over auto demand growth in Europe, which mostly uses platinum loadings in auto catalysts to clean up exhaust emissions. Palladium fell 1.04 percent to $760.00. (Additional reporting by Josephine Mason in New York; Editing by Keiron Henderson and Grant McCool)