Responding to debt jitters in both the United States and Europe, gold surged through the $1,600 (U.S.) an ounce mark, reaching a record high as investors sought the perceived safety of the yellow metal.
Prices ended Monday near their best levels, with New York futures for August delivery closing at $1,602.40 an ounce, up $12.30 or 0.8 per cent. Silver was also swept up in the buying and powered higher, ending at $40.34 an ounce, up $1.27 or 3.2 per cent. It was silver's first foray above $40 since early May.
Analysts said investors buying precious metals remain focused on the debt travails in the U.S., where Congress has been unable to increase the country's borrowing ceiling, raising the risks of a default.
Markets are also closely watching Europe, where there are fears that the sovereign debt crisis is spreading to Italy and Spain, two relatively large economies that would be hard to rescue. Up until now, the euro-debt worries have focused on Ireland, Portugal and Greece, countries with relatively small GDPs.
In times of economic trouble, investors seek precious metals because they're viewed as a form of money that isn't subject to default.
Up until now, U.S. Treasuries have been considered the world's haven investment, but confidence in the securities has been tarnished by the inability to pass a new borrowing limit in advance of an Aug. 2 deadline.
Because of the debt problems "you're not going to buy American dollars right now. You're not going to buy the euro show. You're going to move out of those and get into gold," says Bruce Bruce Bragagnolo, CEO of Timmins Gold Corp., a junior gold miner with production in Mexico.
"The dollar is going down in value, just as the euro," says John Ing, president and gold analyst at Maison Placements Canada Inc., an investment dealer. "We've got problems on both sides of the [Atlantic]ocean."
The rising price of bullion spilled over to mining shares on the Toronto market, with Barrick Gold Corp., the world's No. 1 producer rising 2 per cent, while Goldcorp Inc., another major producer, gained 2.3 per cent.
Swept up by debt worries, gold has been on its longest winning streak in years, rising in each of the past 11 sessions. The pace at which it is passing through the $100-an-ounce milestones has been quickening too. Gold first closed above $1,500 an ounce in late April, and above $1,400 an ounce in November.
Gold miner Mr. Bragagnolo says, "We're going to see $1,800 before Christmas."
Many analysts are optimistic on gold because its price, when adjusted for inflation, is still well below the high reached in January, 1980, of about $850 an ounce, suggesting the bullion market, despite the recent rise, is not yet gripped by mania. To exceed the old high, factoring in inflation, would take a price of about $2,300 an ounce.
Although gold is on a tear now and the metal is being touted as a store of value, prices did fall in a relentless bear market for 20 years following 1980 peak.
Among the more bullish analysts is Erste Group, an Austrian bank, which in a recent note to clients said it has a target price of $2,300 for the metal, but cautioned that figure "could come out on the conservative side."