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Gold hits new record as US debt deadline looms

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Gold prices hit a new record high of US$1,628 per ounce today after efforts to strike an agreement to raise America’s borrowing limit suffered yet another setback yesterday.

A proposal introduced by Speaker of the House Representatives John Boehner came under fire from his own party.

Conservatives within the Republican Party argued that the US$1.2 trillion reduction in budget spending over the next decade was too small. As a result, the House to postponed a scheduled vote on Boehner’s plan to give him more time to rework it.

A rescheduled vote will not take place sooner than Thursday, while the 2 August deadline to raise the debt ceiling is now less than a week away.

Last weekend, Boehner walked away from talks with US president Barack Obama after the two failed to reach common ground on the debt issue. Obama is demanding tax hikes and favours a long term deal, while Republicans want a short term fix and protest against any news taxes.

The prospect of the US failing to raise the debt ceiling and the potential damage it could do has spooked investors, prompting them to pour money into safer assets such as gold. Neither side seems to be willing to back down on their demands.

Gains in the yellow metal were limited by a surge in the US dollar, which bounced back thanks to demand from bargain hunters. The American currency, which has an inverse relationship with gold, fell sharply earlier this week, weakened by the US debt impasse.

Gold last traded at US$1,625/oz. Silver and platinum moved in the same direction as gold, rallying to US$41.17/oz and US$1,811/oz respectively.

Today’s top risers in the sector were:

Orsu Metals (LON:OSU)
, up 20.5 percent at 14 pence at midday

Solomon Gold (LON:SOLG), up 13 percent at 16 pence

Patagonia Gold (LON:PGD), up 7.5 percent at 64 pence

Central Rand Gold (LON:CRND)
, up 7 percent at 0.84 pence

Caledonia Mining (LON:CMCL), up 6.5 percent at 6.39 pence

The top fallers in the sector were:

Alba Mineral Resources (LON:ALBA)
, down 7.5 percent at 0.9 pence

GMA resources (LON:GMA)
, down 0.6 pence

Mwana Africa (LON:MWA)
, down 6 percent at 4.7 pence

Oxus Gold (LON:OXS), down 6 percent at 0.8 pence

Ariana Resources (LON:AAU)
, down 5.5 percent at 4.26 pence

Quick facts: GOLD

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AIM:GOLD
Market: AIM
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