Gold rose to record highs above $1,620 an ounce on Monday, as a stalemate in budget talks in Washington to avert a ratings downgrade and debt default prompted investors to buy the metal as a safe haven. Bullion has gained nearly 8 percent in July, hitting five all-time highs in the past nine sessions, as prospects of a budget breakthrough that would allow the United States to raise its debt ceiling and avoid default faded over the weekend.
"People are still fearful of risk assets, and that's bleeding into the gold market among all the sovereign issues out there," said Jeffrey Sherman, commodities portfolio manager at DoubleLine Capital, which oversees $13 billion in assets. "You can see gold up another $200 to $1,800 by the end of the year just based on renewed fear of devaluation of currencies," he said.
Spot gold hit a record at $1,622.49 an ounce and was up 0.8 percent at $1,614.40 an ounce by 12:02 pm EDT (1602 GMT). US August gold futures gained $12.80 to $1,614.40 an ounce. Silver was up 0.6 percent at $40.355 an ounce. Bullion is up over 7 percent in July, on track for its biggest monthly gain since April on concerns over eurozone debt levels as well as the US budget talks.
Also underpinning gold is Moody's decision to cut Greece's credit rating further into junk territory. Moody's said it was almost certain to slap a default tag on Greek debt as a result of a new EU rescue package. A sharply divided US Congress pursued rival budget plans on Monday that appeared unlikely to win broad support ahead of an August 2 deadline when the $14.3 trillion limit on America's borrowing capacity is exhausted.
An unprecedented debt default in the world's largest economy would likely send shock waves through global markets. Rating agency Standard & Poor's last week reiterated that there was a 50-50 chance the US AAA credit rating could be cut within three months.