Gold Trades Below Three-Week High as Investors Weigh Cyprus, Fed

Gold traded below a three-week high in London as investors awaited the U.S. central bank’s latest policy statement and amid concern Europe’s debt crisis may worsen.

The European Central Bank pledged to provide liquidity to Cyprus after the nation’s lawmakers rejected an unprecedented levy on bank deposits yesterday, throwing into limbo a rescue package designed to keep it in the euro. Gold is down 3.8 percent this year amid signs the U.S. economy is improving. The Federal Reserve ends a two-day policy meeting today.

“The market is currently torn between Fed policy and euro- zone risks,” Joni Teves, an analyst at UBS AG in London, wrote today in a report. “Increasing uncertainty and risks out of Cyprus is keeping gold’s safe-haven bid. A key threat is if the Federal Open Market Committee’s economic forecasts, particularly expectations on the unemployment rate, show significant signs of improvement.”

Gold for immediate delivery lost 0.1 percent to $1,610.85 an ounce by 9:31 a.m. in London. It reached $1,615.76 yesterday, the highest since Feb. 26. Futures for April delivery were down 0.1 percent at $1,609.80 on the Comex in New York.

Futures trading volume was 35 percent below the average in the past 100 days for this time of day, according to data compiled by Bloomberg. Holdings in the SPDR Gold Trust, the biggest bullion exchange-traded product, rose 2.7 metric tons yesterday, the first gain since Feb. 7, data on its website show.

Cypriot lawmakers rejected the 5.8 billion-euro ($7.5 billion) bank-deposit levy that had been proposed in return for 10 billion euros in external aid. Luxembourg Finance Minister Luc Frieden called for euro-area finance ministers to reconvene “as soon as possible” to cobble together a new package.

Silver for immediate delivery was up 0.1 percent at $28.94 an ounce in London. Palladium was 0.3 percent higher at $740.03 an ounce. Platinum rose 0.4 percent to $1,561.90 an ounce, after reaching $1,549.45 yesterday, the lowest since Jan. 7. The seven straight losses through yesterday were the worst run since May. (bloomberg)