Gold surges to new highs on debt deadlock

By Ross Tucker, TheStreet

Gold prices were once again catapulting to new highs after the congressional deadlock on the debt ceiling showed no signs of breaking over the weekend.

Gold (-GC) for August delivery added $10.70 to settle at $1,612.20 an ounce at the Comex division of the New York Mercantile Exchange. Gold reached as high as $1,624.30 in today’s session, an intraday record, and dipped as low as $1,603.80. The spot gold price was rising $14.80, according to Kitco's gold index.

Silver (-SI) prices followed gold higher, with the September contract gaining 24 cents to finish at $40.36 an ounce. The U.S. dollar index was down 0.1% at $74.15.

"Debt ceiling talks and resulting weak stocks were bringing gold investors to increase positions," said George Gero, senior vice president with RBC Wealth Management. Gero warns that the run-up in prices may set investors up for a loss as the end of the month approaches. "Too many new longs at recent high prices, and a cautionary note is missing from all prevailing sentiments."

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"Markets are spooked by the political theatre which continued in Washington over the weekend," said a report from precious metals dealer GoldCore. "An eleventh-hour solution is expected before next Tuesday's August 2 deadline, when the U.S. Treasury has said that it would not be able to borrow any more funds. At the same time, investors have cut their exposure to risky assets and the appalling fiscal situation in the U.S. is positive for gold and silver -- whether the politicians come to an agreement or not."

Gold mining stocks were mixed Monday. Kinross Gold (KGC) was down 1.1% to $17.38, while Yamana Gold (AUY) was adding 0.8% at $13.54. Agnico-Eagle (AEM) was losing 2.1% at $62.04, and Eldorado Gold (EGO) was trading up 0.7% at $18.56. The SPDR Gold Shares (GLD) ETF was 0.7% higher at $157.19.

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