Gold prices broke a new record Monday, driven by concerns over mounting debt worries in the United States and Europe. Gold futures for August delivery reached a fresh high of $1,602.50 per ounce in early trading Monday. The yellow metal has been on a roll since July 12, when it got an extra boost from the minutes of the Federal Reserve’s June policy meeting. They indicated that the central bank could be open to more monetary stimulus. Further stimulus could undermine the U.S. dollar, triggering a flight to gold, the age-old stalwart in troubled times, when investors are afraid to put their money elsewhere.
Market does the “Hussle”
Remington-Hobbs also said that gold prices could be heavily influenced this week by what Federal Reserve Chairman Ben Bernanke says when he speaks Thursday about financial regulation.
Silver was taking its cues from gold, with prices breaking the $40-an-ounce mark for the first time since May 4. Silver rose nearly 3% on Monday to $40.13 per ounce but is still short of its April 25 record of $49.81, noted Remington-Hobbs.
Gold is also still far from its true peak, when adjusted for inflation. Gold hit its real record on Jan. 21, 1980, when it rose to $825.50 an ounce. Adjusted for inflation from 1980 dollars to 2011, that translates to an all-time record of $2,261.33 an ounce.
Silver advanced 6.92% to settle the week at $40.70 amid global suspicions including failure of the US politicians to raise the debt ceiling as the deadline for the same is approaching.
The dollar index remained settled 0.07% below previous week closing after rating agencies threaten US the possibility of losing their credit rating and by a stalled talks on raising debt ceiling.
Global equities measured by the MSCI all country world indexes, posted a 2.23% fall while the Asian benchmark index declined by 1.95%, its first since past four weeks, as the EU finance ministers declined to rule out a temporary default for Greece. On the other hand, the CRB Index, a bellwether for commodities, advanced by 0.80%.
Fitch has cut Greece’s credit grades to its lowest for any country in the world. The move from “B+” to “CCC” reflects the absence of a new fully funded and credible program by the IMF and the EU which intensified a real possibility of default.
US Debt Ceiling Concerns
The US government will need to decide on raising the debt ceiling by the beginning of August; it’s mostly likely to be passed in the next couple of weeks, but in the mean time the internet continues to explore this issue. Moody’s rating agency even went one step further and suggested the United States to eliminate its statutory limit on government debt in order to reduce uncertainty among bond holders.