Gold prices near $1,600 an ounce on Italy chaos

MADRID (MarketWatch) � Gold futures moved closer to the key psychological level of $1,600 an ounce on Tuesday, finding some safe-haven support after Italy�s general election looked set for an inconclusive result and with stocks in Europe and Asia tumbling.

Gold for delivery in April GCJ3 �rose $10.10 to $1,596.70 an ounce on a day when investors turned from riskier assets and toward safe havens such as gold and the Japanese yen.

Reuters

Gold rallied in regular trading on the Comex division of the New York Mercantile Exchange on Monday to take back a portion of last week�s heavy losses. Read: Gold futures score biggest gain of the month

The precious metal tends to benefit in times of political and economic uncertainty, and with nearly all votes from the Italian election counted, the results indicated political deadlock.

A left-wing coalition looked set to win the lower house of the Italian parliament with a tiny majority, but an impasse appeared likely for the upper house. Read: Italy�s lower house to go to Bersani coalition

Gold was climbing even after a major investment bank made a bearish call on the metal. Goldman Sachs said in a note dated Feb. 25 that it was cutting its forecast for this year, saying the turn in gold prices that it expected for the second half of the year had come faster than expected.

The investment bank cut its three-, six- and 12-month gold-price forecasts, to $1,615 an ounce from $1,825, to $1,600 an ounce from $1,805 and to $1,550 an ounce from $1,800, respectively. Goldman said, though, that the �last leg lower in gold prices over the past two weeks� has been excessive. Read: Goldman Sachs cuts 2013 gold price forecast

Strategists at Capital Economics gave Europe�s debt situation as one reason to expect gold buying to pick up. They said they expected the metal to reach a record $2,000 an ounce this year, also aided by supportive global monetary policy and a fading equity rally.

�An extended pause is not a sufficient basis for arguing that the bull market is over,� they said.

Factors that have recently undermined gold of late include speculation of smaller asset purchases from the U.S. Federal Reserve, less demand for safe havens and a strong performance for income-paying assets such as equities, they noted.

Click to Play BP oil-spill trial begins

BP begins a high-stakes trial in federal court, Zynga shares are up on the news that New Jersey is moving toward legalizing online gambling in Atlantic City casinos and a study shows health benefits for the Mediterranean diet.

However �we don�t expect these headwinds to persist throughout 2013,� they said, noting that the U.S. monetary base will still expand rapidly even if the Fed does scale back on asset purchases soon.

In addition, the crisis in the euro zone will probably flare up again later in the year, they said. Meanwhile, sharper volatility in equity markets from current unusually low levels, especially if it�s caused by a sharp selloff, �should revive the safe-haven demand for gold.�

The ICE dollar index DXY , which measures the greenback against a basket of six rivals, rose to 81.789 on Tuesday from 81.766 reached in late North American trading on Monday.

Gold was about the only gainer on Tuesday among precious- and base-metal commodities. Silver for March delivery SIH3 �slipped 14 cents to $28.85 an ounce while copper for delivery in March HGH3 �fell 2 cents, or 0.4%, to $3.53 a pound.

April platinum futures PLJ3 �fell $21, or 1.3%, to $1,600 an ounce while palladium futures for delivery in March PAH3 �dropped $13.85, or 1.9%, to $735.20 an ounce.