Gold Moves Above $1,600 on the Spot Market

By FRANCESCA FREEMAN, WSJ

LONDON—Gold prices broke through $1,600 a troy ounce on the spot market for the first in Europe, supported by concerns over debt in the U.S. and the bloc of euro-using nations, though more definitive move higher stalled as some investors sought to book profits.

At midday, gold was back at $1,599.03 a troy ounce, after hitting $1,600.64. Silver moved back above $40 an ounce to $40.220, after hitting a 10-week high of $40.263.

The August futures contract closed Friday at a nominal record of $1,589.30 a troy ounce, up $3.80, or 0.2%, on the Comex arm of the New York Mercantile Exchange. Gold still is well off the inflation-adjusted record of $2,395.03 a troy ounce, in June dollars, set in January 1980.

Gold extended its win streak as concerns over debt contagion in Europe and failing confidence in the U.S. economy sent investor money into the perceived safety of the yellow metal. Late last week European banking stress tests failed to boost confidence in the region, while two ratings providers last week threatened to downgrade the U.S. credit rating if the issue of the country's debt-ceiling talks remain unresolved.

"If you're concerned about either the euro zone or U.S. debt issues, there's a reason to buy gold," said Mitsui analyst David Jollie. "At [$1,600 an ounce], gold may be overextended to the upside, but the bullish trend seems to be intact."

However, while a temporary pull-back around $1,600 is likely, gold looks well-positioned to move higher, said market players.

Relatively quiet trade Monday suggested that the market wasn't getting "over excited," said the industry participant. "This is encouraging, and suggests that this isn't just a temporary sensation," he said. "Prices could go significantly higher."

Spot gold soared to fresh records in both euro and sterling terms, as nervous European buyers exchange paper currency for the perceived haven metal. The spot price of gold in euros rallied at high as €1,139.22, while in sterling terms, the price hit a record £994.79.