Gold Hits Near 1-Month High on Cyprus Debt Fears

Source: World Gold Council

Gold rose to a near one-month high on Thursday, as safe-haven buying emerged after the European Union gave Cyprus an ultimatum to raise billions of euros it needs to clinch a bailout deal or face a likely exit from the currency zone.

The metal has risen in five of six sessions on resurgent fears about euro zone debt fears, and on hopes that the U.S. Federal Reserve will maintain aggressive stimulus to battle still-high unemployment.

Silver also rose 1.5 percent, on track for its biggest one-day gain in almost two months.

The European Central Bank said it would cut off liquidity to Cypriot banks and a senior EU official said the bloc was ready to see the bankrupt island banished from the euro zone. Earlier this week, global markets slid as Cypriot lawmakers rejected a plan to tax bank deposits to repay debt.

"The Cyprus situation has ignited purchasing of gold from the public who are now becoming concerned that the same can happen where they live,'' said Miguel Perez-Santalla, vice president at online precious metals exchange BullionVault.

(Read More: EU 'Blackmailed' Cyprus: Ex-Cypriot Central Banker)

Spot gold rose to $1,616.36 an ounce, its highest since Feb. 26. It was later up 0.5 percent at $1,614 an ounce.

Technical analysts said gold looked set for more gains after it broke above $1,613, a downward trendline resistance on daily charts.

U.S. gold futures settled $6.30 to $1,613.80 an ounce, with trading volume on track to finish below its 150-day average, preliminary Reuters data showed.

Safe-haven bids were evident as U.S. equities fell while investors kept an eye on events in Cyprus. Wall Street declined as weak technology stocks overshadowed a batch of data suggesting U.S. economic recovery was on the right track.

However, analysts said weakness from wider markets related to uncertainty surrounding Cyprus could also pressure gold as they sold bullion to cover losses elsewhere.

Gold's 12-year bull run has benefited in the last three years from the euro zone crisis. In September, 2011, fears about Greece's debt problems sent bullion to its record high of $1,920 an ounce while equities plunged.

Silver Jumps, Gold ETF Holidings Steady

Holdings of SPDR Gold Trust, the world's biggest gold-backed exchange-traded fund, stood unchanged from a day earlier at 1,222.162 tons on Tuesday. The ETF on Monday posted its first daily inflow since early February.

Silver, which is widely used in industrial applications, outperformed gold after data showed a pickup in the growth of China's vast manufacturing sector.

Spot silver gained 1.5 percent to about $29 per ounce.

Among platinum group metals, platinum rose 0.3 percent to $1,579 per ounce, while palladium was last down 0.4 percent to $754 per ounce.

Investors now digested news Switzerland's palladium exports jumped last month to its highest since September 2008.