Gold and Silver Futures Climb On Uncertainty Over Debt Ceiling

Gold (NYSE:GLD) for August delivery rose as high as $1,607.70 Friday, just 90 cents short of a record high as debate over a new budget continued in Congress. However, when adjusting for inflation, gold would have to climb to $2,400 an ounce to beat the $850 record set in January 1980. Gold ended the day at $1,601.50 an ounce on the Comex division of the New York Mercantile Exchange.

Gold’s gains today came after three straight days of falling prices as the dollar’s buying power became weaker and weaker and advancements toward a plan to resolve Europe’s sovereign-debt issues pushed up European markets and reduced the need for precious metals as a safe investment.

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While the House seems unlikely to accept the Senate’s “Gang of Six” budget proposal, the Senate has already rejected their “Cut, Cap and Balance” bill and neither of the two chambers seems likely to accept the Obama-Boehner proposal that would have both Democrats and Republicans making more concessions than they’d like. Don’t Miss: Update: The Latest on Deficit-Reduction Negotiations.

The $14.3 trillion debt (NYSE:TLT) ceiling must to be raised by August 2 if the country is to avoid defaulting on its obligations, but neither of the two main political parties will support an increase in the debt ceiling before a deficit-reduction plan is in place, leaving Congress with just 11 days to push through a new budget and sign a bill to increase the cap on government spending. While the Treasury remains confident that Congress will be able to raise the debt ceiling on time, Americans are a bit more skeptical.

So while American markets were up yesterday on renewed hope for a debt solution after Europe managed to settle their own debates, the lack of any progress since then has people looking for a safe investment as a government default would result in a huge devaluation of the dollar against a basket of other currencies. Furthermore, Europeans seemed to realize that the Greek bailout wasn’t all they’d hoped, and is no guaranteed solution to the Euro-zone’s sovereign debt problems.

Also trading higher on bad economic news were September silver (NYSE:SLV), which gained $1.18 to reach $40.12 an ounce, September Copper rising 0.6% to $4.41 a pound, and October platinum climbing 0.6% to $1,798.40 an ounce. The only major precious metal losing was September palladium, down 0.3% to $806.40 an ounce.

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