Gold soars above $1,600 for first time

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The price of gold soared above $1,600 for the first time on Monday as investors bought the safe-haven metal amid deepening debt worries in the eurozone and the United States.

Gold jumped as high as $1,603.40 an ounce at 1150 GMT on the London Bullion Market, as the precious metal extended its recent record-breaking surge.

In later slipped back to $1,599.45, compared with $1,587 late Friday.

"Gold hit another milestone ... at $1,600 as investors lose confidence in the ability of politicians to get to grip with the debt problems weighing down on sentiment," said analyst Michael Hewson at trading group CMC Markets.

"More advances look likely while this lack of confidence prevails as investors plough capital into the asset."

The precious metal is widely regarded by investors as a safe-haven in times of global economic turmoil, with investors looking ahead anxiously to Thursday's Brussels summit of eurozone leaders trying to tame a growing debt crisis.

At the same time, US politicians are wrangling over a deficit reduction plan which would allow President Barack Obama to avert a potentially catastrophic US debt default in return for $1.5 trillion in spending cuts.

"The price of gold ... has reached the psychologically important mark of $1,600 ... for the first time ever," said Commerzbank analyst Eugen Weinberg.

"The extraordinary EU summit on Thursday and persisting uncertainty about the debt limit in the US are supporting prices."

Weinberg said the precious metal was also drawing strength from weakness in the dollar.

Markets slid last week as the eurozone debt crisis, which has already sunk Greece, Ireland and Portugal, showed signs of spreading to Italy and Spain.

Before the weekend, the European Union announced late on Friday that only eight of 91 European banks had failed so-called "stress tests" on their capital levels -- much better than expected.

Market expectations had been for 10-15 banks to fall short of the assessment.

Five Spanish banks, two Greek and one Austrian bank failed to meet the regulator's new capital requirements, while another 16 financial institutions only just scraped through with a pass.

However, economists have cast doubt on the credibility of the tests because they did not examine the impact of a potential eurozone nation default -- an outcome that has been stalking financial markets for months as Greece totters on the brink and seeks a second bailout.

© 2011 AFP

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