Spot gold has been on the rise since July 4th, inching up close to the record high of $1,575.78 reached on May 2nd.
Demand in safe haven assets like gold has been boosted by renewed fears of a debt crisis in the Euro zone, especially after ratings agencies cut Portugal and Ireland’s credit ratings recently.
Gold prices briefly fell two weeks ago following a successful vote by the Greek Parliament to implement a bill on tight austerity measures required in order for Greece to receive further aid from the IMF and EU.
European Union leaders are planning to hold an emergency summit this Friday after finance ministers acknowledged for the first time that some form of Greek default may be needed to cut Athens’ debts and to stop contagion spreading to Italy and Spain.
Late yesterday Moody’s cut Ireland’s credit rating down to junk status. Meanwhile, Italy’s debt situation is worsening and investors fear the country may be on the same road to default as Greece, Portugal, Spain and Ireland. The problem is the size of the Italian economy is much greater than the other debt-ridden economies in the Euro zone, and the EU bailout mechanism (EFSF) will have sufficient funds to bailout Italy.
This helped heightened market jitters, in addition to investor concerns over the US debt situation. The US government will be out of funds if it doesn’t raise the debt ceiling by August 2nd.
Gold priced in Sterling hit a new record high 987.11 pounds an ounce, up by 0.5 percent on the day and set for an eighth daily rise.