Gold hit a record high on 3rd August, 2011 as investors made a beeline for bullion for sheltering from impact of the financial markets of the deteriorating outlook for the global economy and worsening debt crisis of Europe.
Spot gold rose to an all-time high of $1,661.14 in early Asian hours to hit its ninth record in 16 trading sessions and up nearly 17 percent so far this year.
U.S. politicians completed a last-gasp deal to avoid a default on Tuesday, but there was little relief for markets as investors focused instead on how tighter fiscal policy could constrict growth of the world’s largest economy.
The size of the U.S. debt remained a concern for ratings agency Moody’s. Moody’s retained its triple-A rating for the United States’ but assigned a negative outlook to it, underscoring the threat of a future downgrade that would drive up the cost of borrowing and could slow future growth.
“People are gravely concerned over government credit and the fact that the U.S. doesn’t seem to be offering satisfying measures to assure fiscal positions and there is the sense that it will ultimately have some kind of real consequences in the markets,” said a Singapore-based trader.
“We are seeing a fairly large scale of capital flight not just out of the dollar, but out of other currencies as well. The precious metals market has emerged as an instrument of default, no pun intended.”
Spot gold was trading at $1,657.88 by 0424 GMT, little changed from the previous close and U.S. gold gained nearly 1 percent to $1,660.6. It rose to a high of $1,664.2, just 30 cents off the record set on Tuesday.