Debt Worries Contribute to Gold Price Increase

Posted July 19th, 2011 at 11:40 am (UTC-5)
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Concerns about financial stability in the United States and Europe are helping to push gold prices to new heights.

The price of gold rose above $1,600 an ounce for the first time in New York trading on Monday. While the price fluctuated in Tuesday’s trading, some economists say even higher prices are possible.

Investors traditionally buy gold during times of crisis because it has a history of maintaining its worth when other investments or commodities drop in value. That mentality spurred an increase in gold prices during the global recession, and analysts say the same type of thinking is behind the recent price increases.

Some investors have been losing faith in other investments, notably government bonds, that have traditionally been considered safe.

Those fears have been driven in part by the political standoff over the United States government debt limit. If the president and lawmakers fail to raise the limit by August 2, Washington will start defaulting on some of its obligations and investors could lose money.

Investors say concerns about the ongoing debt crisis in Greece and other European countries are making gold a more attractive investment.

Financial advisors say worries about inflation have also helped drive gold prices higher.