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Gold Up with New Safe-Haven Demand and EU Worries Resurfacing

March 18, 2013 - The price of gold is higher by midday trade on Monday, after hitting a fresh three-week high and trading above the key $1,600.00 per troy ounce level. Prices are extending gains from last week’s trade as a flare-up in the European Union debt crisis has propelled traders and investors to again seek safe-haven in the gold market.

U.S. gold futures for April delivery gained $10.20 or 0.71 percent to $1,603.80 per troy ounce. The spot price of gold gained $13.27 or 0.95 percent to $1,607.19 per troy ounce.

Cypriot officials are considering taxing savings accounts in their domestic banks as a part of an overall banking bailout plan with the European Central Bank and the International Monetary Fund. Market participants are considering the possibility that similar proposals could be floated in other financially troubled nations in the European Union.

The proposal has infuriated Cypriots with savings accounts and fueled fears of runs on banks not only in the Mediterranean nation, but also in other troubled European economies.

Precious metals have been enjoying a renaissance in safe-haven demand since the fourth quarter of 2012 when investors began to take concerns over the U.S. budget crisis more seriously. The debt-troubled European Union was largely on the back burner during that time, though analysts with Forbes and others have previously said markets should watch for an eventual flare-up. Debt problems in Europe have engendered some relative political agreements but little to no real action to conquer the debt levels themselves.

The U.S. dollar index is trading higher on Monday in the perceived safe-haven demand. The price of gold had been benefiting from a lower U.S. dollar index through last week. A weaker U.S. dollar benefits the price of gold as it makes gold more affordable for holders of foreign currency, thereby stoking demand.

Currently, Forbes states the recent April gold futures prices that reached a new three-week high on Monday signal bulls are starting to gain some fresh upside near-term technical momentum, suggesting a near-term market bottom is in place. Bulls’ next price breakout objective is a close above  $1,619.70 per troy ounce, a level of strong resistance. The February low at $1,554.30 per troy ounce is a solid support level.

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Jonathan Monroe

Senior Staff Writer - Gold-Bullion.org

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