Gold Seen Extending Rebound as Cyprus Revives Bulls

Gold traders are becoming more bullish as concern mounts that a worsening of Europe’s debt crisis will spur demand for a protection of wealth at a time when nations from the U.S. to Japan are signaling more stimulus.

Sixteen analysts surveyed by Bloomberg expect prices to gain next week, while seven were bearish and two were neutral. That’s the highest proportion of bulls since March 8. Prices reached a three-week high of $1,617.07 an ounce this week as Cypriot lawmakers rejected an unprecedented levy on bank deposits that had been proposed in return for external aid.

Turmoil in Cyprus is hurting Europe’s chances of recovering from recession. The European Central Bank said it will cut the island’s banks off from emergency funds after March 25 unless it agrees on a bailout. Investors sold gold holdings and hedge funds cut bets on price gains this year amid signs the U.S. economy is improving and as Federal Reserve policy makers debated the pace of stimulus. The U.S. central bank said March 20 that it will maintain asset purchases to spur growth.

“There’s a dawning realization that the crisis is unfortunately far from over in Europe,” said Mark O’Byrne, the executive director of Dublin-based GoldCore Ltd., a brokerage that sells and stores bullion coins and bars. “Ultra-loose monetary policies are set to continue for the foreseeable future and that would suggest that gold prices could go higher as long as that’s the case.”

The metal is down 3.6 percent this year in London after 12 straight annual gains, the best run in at least nine decades. It was at $1,614.90 yesterday. The Standard & Poor’s GSCI gauge of 24 commodities lost 0.1 percent this year and the MSCI All- Country World Index (MXWD) of equities gained 5.3 percent. Treasuries lost 0.6 percent, a Bank of America Corp. index shows.

(Source: Bloomberg)