PRESS ASSOCIATION -- Gold's reputation as a safe place for your money sent it above $1,600 for the first time.
Investors, worried about debt problems on both sides of the Atlantic, bid gold up $12.30 an ounce to settle at $1,602.40.
This represents a record for the market price for gold, but remains below its 1980 peak after adjusting for inflation. An ounce of gold at that time cost $850, or about $2,400 in today's dollars.
Gold is looking better by the day because debt problems in the US and Europe are making two other so-called safe havens, the dollar and the euro, seem shaky.
The US could default on its debt on August 2 if Congress and the White House do not agree to raise the country's borrowing limit. In Europe, investors are worried that Greece may default. Countries including Italy, Spain and Ireland are also struggling to pay their bills. Defaults could mean losses for the banks that own bonds issued by those countries, and that could trigger widespread disruption in financial markets.
Gold rose 21% in dollar terms in the 12 months through June 30, according to the World Gold Council, an industry group. It rose against other currencies too: up 2.2% in euro, 10.4 in Indian rupees. But gold fell 5.5% against the Swiss franc, which is seen as one of the world's safest currencies.
Gold's rise has accelerated in the last two weeks: Monday was its 10th straight day of gains after it closed at $1,482.60 on July 1. Gold has also steadily risen since the start of 2009, when it cost $880. The Federal Reserve has kept short-term interest rates at a record low of nearly zero since December 2008. Low interest rates weaken the appeal of the dollar, and that in turn sends gold higher.
Investors are behind much of the increase in the price of gold. Demand from investors rose 26% in the first quarter from a year earlier, according to industry data. Demand for gold from dentists for crowns and from companies for use in electronics was flat. Demand for gold in jewellery rose 7%.
The amount of gold held by exchange-traded funds and similar investments is at a record, according to Barclays Capital. Exchange-traded funds, also known as ETFs, trade like stocks and are a way for investors to own gold without having to store and insure actual gold bars or coins.
But much of that demand has been from speculative investors, such as hedge funds, said Jon Nadler, senior metals analyst with Kitco Metals. Gold could plunge - if investors regain their confidence that the US will not default and that the 27-nation European Union will not be threatened by the region's debt problems.Suggest a correction