Gold surged to a new record high in New York trading following disappointing economic growth data from the United States, pushing nervous investors to safe haven investments.
The news was a blow to investors’ confidence which was already weak amid the deadlock in the American government to reach an agreement on a budget and to raise the debt limit. Fears of a default and the economy going back into recession are mounting. Speculation is also rising on the prospect of further monetary easing and a weaker dollar.
Meanwhile, Euro zone debt woes are still on the minds of investors as well.
Adding the two issues together, makes even more reason to shift to the precious metal to hedge against inflation and political and economic uncertainty that reigns in the markets at the moment.
Spot gold touched an all-time peak of $1,632.43 a troy ounce, a gain of about 8 percent so far this week and over 14 percent so far this year.
The U.S. Dollar fell against most major counterparts after the U.S. GDP data and dropped to record lows against the Swiss Franc.
A weaker Dollar pushes gold prices higher due to the inverse relationship between the two.
Gold prices are predicted to move higher as long as neither Europe nor the U.S. demonstrate an ability to ensure long-term fiscal sustainability, which they haven’t done so far.