Gold soars above $1,600 amid fears of Cyprus bank deposit tax

Cyprus agreed to receive a 10 billion euro ($13 billion) bailout from the International Monetary Fund and its European partners. In exchange, the Cyprus government is debating to impose a bank deposit tax: a 6.75 percent tax on deposits under 100,000 euros ($130,000) and a 9.9 percent tax on any amount above.

Although a final vote will take place on Tuesday, gold is already responding as investors are, yet again, seeking a safe haven from the ongoing financial crisis that has engulfed much of Europe. During the morning trading session, gold futures jumped above the $1,600 mark for the first time since February.

At the time of this writing, gold is up at $14.80 at $1,607 per ounce. Even with analysts urging investors to be cautious, people are looking to reduce their risks since savings accounts are no longer considered safe in Cyprus – even elsewhere with low interest rates – and gold offers this safe haven.

“Gold should profit from the possibility that savings are no longer regarded as safe, and should thus enjoy strong demand in the current market environment. We therefore expect to see prices continuing to rise,” Commerzbank analysts said in a note, according to the Wall Street Journal. “The headwind from speculative financial investors has abated noticeably of late: they once again expanded their net long positions by nearly 8% to 44,300 contracts in the week to 12 March. If sentiment amongst money managers should continue to brighten, this could contribute to higher gold prices.”

Other precious metals have remained flat. Silver is up $0.08 at $28.93, while copper is down 0.08 cents at $3.44. Platinum also fell $11.40 to $1,581.

Gold and other precious metals have suffered a decline in the past several weeks due to supposed positive economic data in the United States, China and in Europe. It is suggested that this could lead to central banks halting its policies of inflation and pumping money into each nation’s economy.

However, recent data has suggested that central banks are still accumulating gold. Global Gold News reported late last month that central banks worldwide, especially in Eastern Europe and northern Asia have been acquiring gold bullion at high levels.