Thursday’s gains were sparked by rating agency Moody’s saying US bonds were on review for possible downgrade which followed similar warnings by S&P. Although Fed chief Ben Bernanke has downplayed talk of fresh stimulus for the US economy ongoing political wrangling about the US’s $14.3 trillion debt ceiling are sending investors into safe havens like gold.

MarketWatch pointed out that prices, however, remain well below the previous record high for gold in real terms of around $2,400 on Jan. 18, 1980, according to a research note from Capital Economics.

Emergency meetings in Europe earlier in the week where finance ministers considered allowing Greece to default on some of its debt, the spread of the euro crisis to Italy and news on Tuesday that US Federal Reserve minutes indicate the possibility of additional financial stimulus lit a fuse under gold.

Gold is considered a hedge against inflation and further quantitative easing could flood financial markets with cheap money as it did in the previous round – QE2 – when US monetary authorities injected some $600bn to drive down interest rates.
Read more here:
Gold takes a breather Friday, then takes off again

Gold is considered a hedge against inflation and further quantitative easing could flood financial markets with cheap money as it did in the previous round – QE2 – when US monetary authorities injected some $600bn to drive down interest rates. Gold for August delivery on the New York Mercantile Exchange was trading at $1,568.40 an ounce in late trade after settling at a record $1,562.30 an ounce earlier.

Minutes from the US Federal Reserve meeting in June stated:

“Some participants noted that, if economic growth remained too slow to make satisfactory progress toward reducing the unemployment rate, and if inflation returned to relatively low levels after the effects of recent transitory shocks dissipated, it would be appropriate to provide additional monetary policy accommodation.”

The US added just 18,000 jobs in June, the lowest figure of 2011, and the unemployment rate ticked up to 9.2%. More than 14 million Americans are looking for work.

Image of Ben Bernanke, Chairman of the Federal Reserve speaking at the National Press Club, February 3, 2011 in Washington, DC is by Albert H. Teich / Shutterstock.com.
Read more here:
Gold hits new record as further US stimulus appears on the horizon