Gold Price Today: Silver Prices, Gold Price Soar on Debt Issues - Gold rose to a record high Monday amidst worries of a debt contagion in Europe and uncertainty over how lawmakers plan to resolve deficit negotiations in the U.S.
Gold for August delivery settled $12.30 higher at $1,602.40 an ounce at the Comex division of the New York Mercantile Exchange. The yellow bullion reached as high as $1,607.90 an ounce and $1,591.40 on the lower end. Meanwhile, the spot gold price climbed by $9.90, according to Kitco's gold index. New highs for gold this week follow a record $1594.90 per ounce high from last week's trading.
Silver was last gaining $1.18 to $40.25 an ounce.
The deficit debate between Republicans and Democrats remains volatile as the parties continue to clash over tax and entitlement programs. In the worst case scenario, analysts say failure to raise the debt ceiling would lead to a government bond default that would trigger a collapse in the U.S. financial system, with ramifications globally. Ratings agency Moody's has already announced that it may downgrade U.S. credit. Most economists still believe, however, that the U.S. will resolve the debt issue ahead of the Aug. 2 default deadline and that U.S. Treasuries are still the safest and most liquid asset for investors.
"Gold is the uncertainty hedge," said Chuck Butler, president of EverBank World Markets. "We've had no shortage of people saying there is going to be Armageddon if the debt ceiling isn't raised." Investors remain worried about a possible debt downgrade if Washington raises the debt ceiling but does not implement significant cuts in spending, added Butler.
European contagion fears were also weighing down on global investors, with the FTSE in London declining 1%, and the DAX in Frankfurt was losing 0.9%.
Results from European bank stress tests last week failed to inspire confidence. Some feel the tests failed to adequately account for the massive exposure that European banks have to not only sovereign debt, but also trillions of dollars in residential mortgages, and loans to businesses and institutions.
The euro was losing 0.756% against the greenback, which gained 0.592% in the dollar index. "Currencies like the Norwegian krone, Singapore dollar, Australian dollar and Swiss franc are likely to outperform the debt saturated U.S. dollar, British pound and euro," according to a research report by GoldCore.
The weaker euro was giving a boost to precious metals. "Competitive currency devaluations and global currency debasement mean that all fiat currencies are at risk of revaluing and losing purchasing power," said GoldCore. The report added that gold and silver would push toward their inflation adjusted highs. Gold reached a real high of $2,400 per ounce in 1980. That same year, silver reached its real high of $140 per ounce.
George Gero, metals strategist at RBC Capital Markets, explained that silver is being lifted along with gold's rising tide and also by increased demand from Japan as the country recovers from its earthquake disaster and seeks to restore assembly lines for glass and computers for automobiles. "Silver is the bridge between investment demand and industrial demand," he said.
"Should there be some serious progress in the eurozone and in the U.S., that will affect silver and gold," added Gero.
Gold mining stocks were gaining with Kinross Gold(KGC_) up 1% to $17.58 and Yamana Gold(AUY_) up 1% at $13.24. Eldorado Gold(EGO_) was jumping by 2% to $18.32.
The recent surge in gold and silver has fueled confidence that precious metals will climb to fresh highs. Butler of EverBank World Market said that "gold could set new record highs every day this week" although he added that some selling by longer term investors may lead to a dip in prices. "You'll see profit-taking, which will flush out stale old longs and help form a new base and move gold prices forward," he said.
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