Gold Surges to Fresh Record as Debt Stalemate Bites

Gold prices rose to an all-time record in New York to touch $1623.70 as investors weighed in the possibility of a debt default in the U.S.

The White House and the Republican leadership of the Congress are in a continued stalemate over raising the debt limit from $14.3 trillion. As the August 2 deadline is fast approaching, investors are fretting over the prospect of an unprecedented default and gravitating towards real assets like gold.

In Asia too, the US standoff rubbed off on gold prices. Gold for August delivery rose to $1,622.00 while the December contract hit $1,626.90. It is the sixth time in just two weeks that gold prices have breached record.

Analysts reckon that gold prices will continue to rise in the coming days if the U.S. political leadership remains deadlocked over the debt ceiling issue. In times of economic and political doldrums, gold has risen thanks to its safe haven appeal.

"The prices are trying to push higher, but traders are mostly on the sidelines and involvement is not too aggressive," a Hong Kong-based head of trading in a bank was quoted as saying by Dow Jones Newswire.

In Singapore, spot gold hit an all-time high of $1,625.24 on Wednesday. The Financial Post reported from Singapore that currency market turmoil also helped the gold rally. The dollar sank to a three-month low against a basket of major currencies in the wake of the debt ceiling stalemate.

“It’s ambiguous what currencies are the so-called haven in the middle of all the problems in the West,” it quoted a Singapore-based trader as saying.

Meanwhile, Reuters reported that a small majority of economists, who took part in a polling by the news agency, said the U.S. would lose its top-notch AAA credit rating from at least one major rating agency.