Gold hits record on US, EU debt worries

Singapore - Spot gold touched a record high on Monday, on track for its longest winning run in at least four decades as the metal reflects persistent worries about the eurozone debt crisis and the growing threat of a US government default.

Spot gold rose to an all-time peak of $1 598.41 and US gold hit a record high of $1 599.20.

The appetite for bullion as a safe storage of value increased as Republicans and Democrats sought to craft a plan that could avert an unprecedented government default, which might wreak havoc in global markets and send the world's top economy back to recession.

Adding to worries about the economic growth, US consumer confidence hit a near two-and-a-half-year low in early July and manufacturing output stalled in June.

"The political uncertainties in the United States and Europe will be an ongoing theme and safe haven demand will continue," said Natalie Robertson, a commodities analyst at ANZ.

Robertson expected gold to reach $1 650 in the short term on macro concerns and chart strength, but added that volatility may increase as the deadline for the US debt ceiling talks on August 2 draws close.

Spot gold edged up 0.2%  to $1 596.20 an ounce in early morning trade, on course for an 11th straight session of gains - its longest winning stretch in at least four decades.

US gold gained 0.4% to $1 596.70.

Results of stress tests of 90 banks across the European Union were better than expected, but failed to impress investors who continue to worry about the contagion possibility of the region's debt crisis.

"This move in gold still has momentum, as Europe is burning to the ground," said a US-based trader.

Technical analysis also pointed to a bullish picture. Spot gold has resumed its medium-term uptrend and would rise towards $1 613, said Reuters market analyst Wang Tao.

Indicating increased appetite in bullion, speculators sharply raised their bullish bets in US gold futures and options last week as prices rallied, data from the US Commodity Futures Trading Commission showed.

Holdings at the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose nearly 1% to 1 236.013 tonnes, the highest since late January.

"Gold prices have hit fresh highs across several currencies on macro unease, the dollar weakening and the escalation of European sovereign debt uncertainty creating a favourable backdrop," said Barclays Capital in a research note.

"We expect prices to test new highs despite the seasonal weakness in demand."

Spot silver hit $39.95, its highest since May 4. It was trading at $39.84, up 1.5%, leading the year-to-date performance in the precious metals complex with a 29% gain.

US silver gained 2% to $39.87.

The gold-silver ratio, used to measure how many ounces of silver can buy an ounce of gold, declined to 40.10, its lowest since the end of May.