Gold hits record price on debt uncertainty

In the Lead: “You Go Your Way, I'll Go Mine...”

With but hours (168 and counting down) to go before August 2nd rolls around, the political arm-wrestling matches continued without respite in Washington after having come to an American version of a Mexican standoff on Friday afternoon. Albeit President Obama has already assured the markets that the US will not default on its obligations under any circumstances that he might be able to do something about, the markets exhibited no modicum of a trend towards calming down as yet. Separately, former President Clinton’s spouse, now Secretary of State, reassured China that the US will not go down the path of a default despite the overt fireworks taking place in his nations’ capital around the clock.

The Democratic and the Republican lawmakers in the States have now begun to forge their own separate and competing plans to cut the nation’s deficits and to raise its debt ceiling. However, as of this writing, and with just minutes to go prior to the opening of the markets on Monday morning, the only thing that investors and the public at large could bank on was the likelihood that a deal might only be announced very late in the game of “blinksmanship” and that the House and the Senate would have to work 24/7 in coming days to get the deed done and ready for launch.

Spot gold prices hit a fresh overnight all-time high above $1,622 the ounce as the overseas trading action reflected the continuing nervousness surrounding the US debt limit impasse. If there is one thing that markets want, it is clarity; this was made fairly clear ahead of last week’s EU summit on the issue of Greek debt. If there is one thing that markets abhor, it is uncertainty; that is being made amply clear right about now.

Conflicting talk, half-baked plans of short-term debt limit extensions, continuing warnings from ratings agencies, none of these sit well with those who normally make a buck on betting on a defined trend. Thus, the one beneficiary that thrives on ambiguity – gold – was the one in prominence among players over the past several days and hours. The only other thing in heavy ‘rotation’ was the number of talking heads (most of them official heads) on display on the Sunday talk show circuit in the media. Warning, speculations, assurances, warnings, bold predictions, warnings; it sounded like a normal Sunday, of late.

New York metals trading opened with gains of $15 in gold and 73 cents in silver this morning. The former was quoted at $1616 and the latter at $40.80 per ounce against only a slightly weaker US dollar and against a decline in crude oil. Potential targets for gold – should the debt mess continue to swamp DC – include the value zone from $1,630 to $1,645 but the market also presents some real dangers given the large crowd that has piled in very recently, the options expiration timetable (tomorrow) and the chance that President Obama might go in front of microphones literally at any moment between now and a week from now to announce certain tangible results to this artificial crisis that has been brought on by lawmakers.

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