Gold hits new high as debt talks stall

SYDNEY | Sun Jul 24, 2011 8:23pm EDT

SYDNEY (Reuters) - Gold rose to fresh record high on Monday as talks over lifting the debt ceiling appeared to be stalling just days before the August 2 deadline, raising the prospect of a debt default.

Spot gold climbed as high as $1,622.49 an ounce versus Friday's high of $1,607.01 and the previous record of $1,609.51 before easing back to $1,614.66 by 0007 GMT, Reuters data showed.

President Barack Obama and congressional leaders struggled late on Sunday to break a partisan deadlock on a budget deal and bullion dealers said investors were ditching stocks in favor of safe haven assets, such as gold, until the outcome of talks become clearer.

A slightly weaker U.S. dollar at the start of early trading in Asia gave gold its initial lift, though bullion continued to firm even as the greenback later stabilized, according to bullion dealers.

"Gold is moving on its own," a dealer said.

U.S. gold also hit a fresh record high at $1,624.30 an ounce.

Tokyo shares .N225 were 0.7 percent lower in early trade on Monday while the Australian market .AXJO eased 0.5 percent.

Investors were putting money in what they consider more stable investments, such as exchange-traded gold funds rather than equities with their perceived risks from market fluctuations and the individual company, according to London-based stockbroker Ambrian Partners.

"In the absence of deficit deal then the pressure is all on the greenback in the short term at least," said BNZ currency strategist Mike Burrowes.

"But if they come up with a decent, credible plan for deficit reduction in the long term then that could pave the way for some U.S. dollar strength."

(Reporting by Jim Regan; Editing by Balazs Koranyi)
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Comments (9)
funksoul6 wrote:
It seems to me that if the U.S. fails to raise the debt ceiling, that should make for a STRONGER, not weaker Dollar. As with any other borrower, if you restrict their ability to enter into additional debt, they have to live more within their means. Anyone who says that a failure to pass a debt ceiling increase will result in the U.S. defaulting on its debt is either woefully ignorant, or guilty of trying to use scare tactics to gin up support for the left. The interest on the accumulated debt is $250 billion A YEAR. The government takes in $2.5 trillion in tax receipts per year. There is still plenty of revenue available to keep our national debt current, pay the military personnel AND make scheduled payments on Social Security.

Jul 24, 2011 10:31pm EDT  --  Report as abuse
crm12345 wrote:
In the early 1970′s, one ounce of gold could be bought for $35 US dollars. In other words, $1 USD dollar could buy 1/35th of an ounce of gold.

Now at over $1,600 US dollars per ounce, $1 US dollar can buy only 1/1,600th of an ounce of gpld.

Gold is NOT more valuable now than it has ever been. Over the centuries it has been rightly regarded as a storehouse of wealth/value. It’s value is constant. But ………..

what’s really happening is the diminishing of the purchasing power of the US dollar. The dollar is being deliberately destroyed by those ‘behind the scene’ powerful people who want to see the power of the US government/society/citizens destroyed.

Jul 25, 2011 10:06am EDT  --  Report as abuse
BeanerECMO wrote:
@crm12345; re: …dollar is being deliberately destroyed by those ‘behind the scene’ powerful people who want to see the power of the US government/society/citizens destroyed. They are not behind the scenes (except Soros); they are right out front: e.g., BHO, Geithner, Bernanke, Reid, Pelosi, van Hollen, Frank, IMF, credit houses, etc., and they are being aided and abetted by the legacy media. Instead of trying to lay out a positive message; e.g., US will not default on servicing its loans; it will, concommittantly, radically cut spending to low priority, highly expensive, failing social programs. Instead, the administration is out there, aided and abetted by the legacy media, spouting gloom and doom of what happens if we don’t pass a ceiling increase, which, in turn, allows the administration to put us further into debt.

Jul 25, 2011 11:19am EDT  --  Report as abuse
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