March 25, 2013 / 11:21 AM / 5 years ago

PRECIOUS-Gold down as Cyprus bailout deal ease market fears

* 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 (Reuters) - 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
investment newsletter.
    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.
    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
precious metal. 
    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
broader economy. 
    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)

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