Hypo Venture Capital Zurich Management: Gold price climbs to new record on debt uncertainty

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19 July 2011 Last updated at 15:03 GMT

The price of gold has hit a new record price of $1,610 an ounce as debt worries in the US and Europe have intensified.

It climbed above $1,600 for the first time on Monday, capping a record-breaking rally of 11 days of gains.

Gold is considered a safe investment and usually gains at times of global economic uncertainty.

But Spanish and Italian bond yields eased and banking shares rose, reversing large falls seen on Monday.

Government borrowing costs are continuing to rise, though. A Spanish bond auction was oversubscribed, but the government was forced to offer sharply higher returns to sell 4.45bn euros (£3.9bn) of bonds.

On the 12-month bonds, the average rate soared to 3.7% from 2.7% at the last such auction on 14 June. For 18-month bonds, the yield was up to 3.9% from 3.3% last time.

Gold prices have been rising because of continued concerns over Europe’s debt crisis

Bank rises

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sday. The rate on Italian 10-year bonds fell to 5.7% having topped 6% on Monday, while the rate on the Spanish equivalent fell 0.15 percentage points to 6.12%.

On Monday, yields had risen in a sign that financial markets were sceptical that governments would be able to bring an end to the debt crisis.

European banking shares also rose on Tuesday, buoyed by the bond market and helped by a better performance from US bank shares late on Monday.

Shares in Lloyds Banking Group rose 4.1% in London, while French banks Societe Generale, Credit Agricole and BNP Paribas also rose by between 3.5% and 4.5%.

‘More advances’The record breaking gold price comes ahead of Thursday’s summit of eurozone leaders in Brussels where they will once again try to contain the growing debt crisis.

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Gold price reaches new high on eurozone debt fears

Investors are concerned that Greece may default on its debt, and countries such as Italy and Spain, who are also struggling with high debt levels, will get pulled into the crisis.

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