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Gold Prices Settle Above $1,600 on Cyprus Woes (Update 1)

Updated from 11:14 a.m. ET with settlement prices

NEW YORK ( TheStreet) -- Gold prices jumped Monday as investors moved into the yellow metal as a safe-haven play amid fears that the bailout plan for Cyprus could spread throughout the eurozone region.

Gold for April delivery rose $12 to settle at $1,604.60 an ounce at the Comex division of the New York Mercantile Exchange. The gold price traded as high as $1,610.40 and as low as $1,589.60 an ounce, while the spot price was jumping $12.50, according to Kitco's gold index.

"Capital flight from Europe seeking a safe haven and the possibility the eurozone might be torn apart will benefit both the U.S. currency and gold," Jeffrey Nichols, senior economic adviser to Rosland Capital, wrote in an email correspondence. "In any event, we should expect a spillover effect with popular disapproval of austerity measures in other countries threatening to topple Europe's house of cards -- all of which suggests more life ahead for gold."

The silver price for May delivery added 2 cents to $28.87 an ounce, while the U.S. dollar index was soaring 0.6% to $82.62.

Cyprus, a small island nation-state in the Mediterranean Sea, is seeking €10 billion ($13 billion) in bailout loans from fellow eurozone countries, but creditors have required Cypriot officials to tax all savings accounts of the nation's banks.

European investors fear that such action would set a precedent that creditors could demand of other troubled eurozone members in the future.

"If you have deposits in Spain and Italy, you have to really be considering that those deposits aren't going to be safe for too much longer," said Jeffrey Sica, chief investment officer of Sica Wealth Management. "Even mere mention of deposits being fair game will lead people not only to withdraw money out of their bank accounts, but lead them towards hard assets like gold."

The Cypriot parliament has postponed a vote on the savings account tax until Tuesday evening. Sica said gold prices may not have risen higher on Monday morning because investors may see the vote delay as a signal that the tax on deposits may not occur.

Gold mining stocks closed mostly higher on Monday. Shares of Eldorado Gold (NG) rose 1.7% and shares of Yamana Gold (GOLD - Get Report) climbed 1.2%

Among volume leaders, Kinross Gold (KGC) increased 0.88%

Gold ETF SPDR Gold Trust (GLD) finished up 0.9%, while iShares Gold Trust (IAU) added 0.81% on volume that totaled 20.4 million shares.

-- Written by Joe Deaux in New York.

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