Gold hits record as U.S. debt talks grind on

SAN FRANCISCO (MarketWatch) — Gold futures traded in record territory Monday as U.S. debt-ceiling talks to avert a default continued, with little to indicate progress toward a deal.

Gold for August delivery gained $16.80, or 1%, to $1,618.20 an ounce on the Comex division of the New York Mercantile Exchange. It traded as high as $1,624.30 an ounce earlier.

Protracted U.S. debt-limit negotiations and concerns about Europe’s sovereign-debt crisis pushed gold to a nominal record of $1,602.40 an ounce last week.

Adjusted for inflation, gold would have to settle at around $2,400 an ounce to supplant a record around $850 an ounce reached in January 1980.

The metal has benefited from uncertainty stemming from global debt problems in recent weeks, with the deadlock in U.S.talks taking center stage on Monday.

U.S. lawmakers failed to reach agreement on an approach to raise the debt-ceiling in Washington on Sunday, despite a weekend of talks. President Barack Obama later met with the congressional leaders of his own party.The $14.3 trillion debt ceiling needs to be raised by Aug. 2 or the government is at risk of defaulting on its obligations.

Analysts at MF Global said the lack of resolution in U.S. debt-ceiling talks will weigh on the dollar, and in turn present upward potential for gold.

“Raising the debt ceiling in such last-minute fashion relays [an] unwelcome message to investors,” the analysts said, “The main casualty of such a decision will be the U.S. dollar.”

Commodities should do better, at least initially, they said, as the asset class will be viewed as an alternative to paper currencies.

“Gold should benefit the most,” the MF Global analysts said.

Market Watch

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