Gold Prices Pull Back on Profit-Taking

NEW YORK ( TheStreet) -- Gold prices were pulling back on Wednesday as investors took profits from a two-day winning streak that resulted from troubles in Cyprus.

Gold for April delivery was shedding $2.60 to $1,608.70 an ounce at the Comex division of the New York Mercantile Exchange. The gold price traded as high as $1,613.90 and as low as $1,605 an ounce, while the spot price was dipping $4.20, according to Kitco's gold index.

Cyprus has needed about €17 billion in bailout funds, but European Central Bank officials have been willing to part with just €10 billion. Part of the discussions to receive those funds included a tax on bank deposits in the country, but the Cypriot parliament voted down the measure late Tuesday.

Gold popped on Monday as investors moved into the yellow metal as a safe-haven play amid fears that the bailout plan for Cyprus would spread to other distressed economies in the eurozone, and the precious metal advanced a second day for its safety appeal.

"The immediate threat of Cyprus is out of the market, so you're seeing a little profit-taking," said George Gero, precious metals strategist at RBC Wealth Management. Gero said Tuesday's rally witnessed open interest decline instead of advance, which he said means there was more short-covering than new buying in gold.

People may be sitting on the sidelines on Wednesday in anticipation of the Federal Reserve's policy-making announcement.

The Federal Open Market Committee will conclude its two-day meeting and issue a statement at around 2 p.m. EDT. FED Chairman Ben Bernanke conduct a press conference shortly after the announcement.

Traders likely are searching for any hint from Bernanke and the Fed as to whether the central bank will scale back its quantitative easing programs any time soon, especially as a slew of U.S. economic indicators in recent weeks have continued to beat economists' expectations.

Silver prices for May delivery were sliding 8 cents to $28.77 an ounce, while the U.S. dollar index was dropping 0.45% to $82.67.

"Silver has sold off because of Cyprus , and that's mainly because in times of stress we tend to see silver acting more like an industrial metal rather than a safe-haven store of value, such as gold," Will Rhind, managing director at ETF Securities U.S., said in an interview.

The Cypriot bank troubles have left silver in a tight trading range, largely because the market's perception is that the metal's safe-haven appeal is offset by the industrial weakness a Cyprus default could generate.

The Bank of England's minutes from its latest meeting revealed interest rates would remain unchanged at 0.5%, and that the central bank would continue £375 billion in asset purchases. Three members of the committee voted to boost the size of the asset purchase program to £400 billion, the Bank of England said.

Gold mining stocks were mostly lower on Wednesday. Shares of AngloGold Ashanti ( AU) were falling 1.6%, and shares of Yamana Gold ( AUY) were off 1.5%.

Among mining ETFs, Market Vectors Gold Miners ETF ( GDX) was decreasing 0.66%, as Market Vectors Junior Gold Miners ETF ( GDXJ) was down 0.24%.

Gold ETF SPDR Gold Trust ( GLD) was slipping 0.36%, iShares Gold Trust ( IAU) was losing 0.33% and ETFS Gold Trust ( SGOL) was declining 0.41%.

-- Written by Joe Deaux in New York.

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