After a tumultuous week in the financial and metals markets due to near-financial meltdown in Cyprus, the gold price slipped below $1,600 after a bailout deal was announced. Gold continued to be beaten down after a report was released indicating that bullion's bull run may be over.
Financial markets were poised for chaos on Monday, the deadline set by the European Central Bank for a bailout deal worth 10 billion euros for the embattled Mediterranean island. Failure to reach agreement could have triggered the ECB to cut off funding to Cypriot banks, pushing the country into bankruptcy. But an 11th-hour agreement saw the ECB agree to the deal with the stipulation that Laiki, the country's second largest bank, would be wound down, and that bank deposits valued over 100,000 euros be taxed at around 30 percent.
The turmoil had run the gold price up past $1,615, but the relative calm in the Eurozone after Monday's Cypriot bailout deal caused the bullion price to languish. That, and a bearish report on gold, saw the precious metal drop once again below $1,600. CPM Group, a commodities consultant, said on Tuesday the gold price is expected to fall three percent in 2013 "as fears of catastrophic events fade." The group predicts net buying by gold investors to drop for a second consecutive year, despite an increase in buying by gold fabricators and central banks.
"What we see is weak, muddle-through economic growth for the next few years," Business Standard quoted Rohit Savant, CPM Group's senior commodities analyst, as saying. Savant also said that gold's limited gains during the crisis in Cyprus "suggests that a lot of the bullish factors that had lifted gold in the past several years are already factored in."