Gold surged to an all-time high above $1,600 an ounce on Monday, extending a record rally as investors sought a safe haven on fears that US lawmakers could fail to raise the debt limit, resulting in a default.
Gold rallied even as the US dollar strengthened, helping the precious metal hit record highs across a number of major currencies, namely euro, sterling, South African rand and the Canadian dollar.
The latest rally, which began three weeks ago on eurozone debt worries, has powered gold into uncharted territory. Europe has been struggling to put together a second bailout for Greece and contain its debt crisis.
Bullion has gained 8 percent in 11 days as President Barack Obama and Congress have failed to reach an agreement to raise the $14.3 trillion US borrowing limit. With the clock ticking toward an August 2 deadline, investors have turned to gold at the expense of riskier assets such as equities and commodities.
"What''s coming out of these debt talks is that you are seeing a lot of people focusing on the numbers and understand the ramifications of debt burden on countries. Governments are at a very precarious situation which is not easy to rein in," said Robert Lutts, chief investment officer of Cabot Money Management, which manages over $500 million in assets.
Spot gold rose as high as $1,607.01 an ounce and was up 0.8 percent at $1,605.30 an ounce by 11:08 am EDT (1508 GMT). It has now set record highs in three out of the last four sessions.
US gold futures for August delivery were up $16.40 an ounce at $1,606.40.
Adjusted for inflation, gold''s all-time high was above $2,300 an ounce set in 1980.
Silver soared nearly 4 percent, topping $40 an ounce for the first time since early May. Silver hit a two-month high of $40.70 an ounce and was up 3.5 percent at $40.64 an ounce.
Silver has rallied more than 15 percent in the last two weeks. The metal, which has a strong industrial demand component, rallied to a record $49.51 an ounce in April before correcting sharply.