The price of gold surged on Monday above USD 1,600 per ounce for the first time in history, as investors bought the safe-haven metal amid deepening worries over the eurozone debt crisis, AFP reports. Gold jumped as high as USD 1,600.10 an ounce in early morning trading on the London Bullion Market, as the precious metal extended its recent record-breaking surge which began on Friday.
Spot gold was up 0.45% at $1,600.10 an ounce at 08:37 GMT. Silver also rose, tracking gold, to its highest since early May at $40.15 an ounce.
The appetite for bullion as a safe storage of value increased as Republicans and Democrats sought to craft a plan that could avert an unprecedented government default, which might wreak havoc in global markets and send the world’s top economy back to recession.
Adding to worries about the economic growth, US consumer confidence hit a near two-and-a-half-year low in early July and manufacturing output stalled in June. “The political uncertainties in the United States and Europe will be an ongoing theme and safe haven demand will continue,” said Natalie Robertson, a commodities analyst at ANZ.
Robertson expected gold to reach $1,650 in the short term on macro concerns and chart strength, but added that volatility may increase as the deadline for the US debt ceiling talks on August 2 draws close. The banking woes came as Spanish and Italian bond yields rose and the euro slid to a record versus the Swiss franc on concern European leaders will fail to agree on measures to contain the region’s debt crisis at a ‘special summit’ on Thursday.
The head of the European Central Bank, Jean-Claude Trichet called on eurozone leaders to speak with one voice in the debt crisis, while defending German Chancellor Angela Merkel against accusations of foot-dragging.
“There is an absolute need to improve ‘verbal discipline’,” Jean-Claude Trichet said in an interview.
“The governments need to speak with one voice on such complex and sensitive issues as the crisis,” he said, while acknowledging that having 17 different governments made things “complex.”
Over the weekend Poul Thomsen, the International Monetary Fund’s mission chief to Athens, said that Greece’s finances were on “a knife edge.” Last week the IMF said Greece needed an extra €100bn (£88bn) of aid on top of the €110bn bail-out package agreed last May. Greece is already being crushed under its €350bn debt pile.
The 17 eurozone nations are due to hold a crisis summit in Brussels on Thursday to agree fresh support for Greece and urgent measures to prevent contagion spreading to Italy and Spain – the third and fourth biggest economies in Europe respectively. On Friday Italy passed a €48bn austerity budget aimed at radically reducing the public deficit by 2014.