Gold price touched a new record high overnight at $1,624 per ounce

The gold price touched a new record high overnight at $1,624 per ounce before backing off to trade at $1,617 Monday morning. Gold prices were boosted by the lack of agreement over the weekend to raise the $14.3 trillion debt ceiling and the negative implications for financial markets. The price of gold surged to fresh highs as concerns escalated that the Unites States could lose its AAA credit rating. The U.S. dollar declined modestly versus the euro and pound while commodities were mixed. Crude oil fell 0.7% to $99.30 per barrel. Silver was the best performing component of the 19 member Reuters/Jefferies CRB index, rising 2% to $40.87 per ounce early Monday.

House Republicans are unwilling to raise taxes as part of a deal, leaving President Obama in the difficult position of having to forge a deal unpopular among the great majority of his voting base. The possibility of a short-term deal that raises the debt ceiling in stages – a scenario the President repeatedly stated he did not want to do – appears to be back on the negotiating table. The gold price – as well as the broader stock and commodity markets – will likely be volatile this week as every piece of news related to the negotiations is parsed.

The quarrel between President Barack Obama and congressional Republicans over the debt ceiling should continue to drive markets. Movements in the gold price will continue to be driven off the debt ceiling discussions as well as and sovereign debt developments. A busy week of economic data in the U.S. could also impact the precious metals. On Tuesday, the Cash-Shiller report on home prices will be released, followed by reports on consumer confidence and new home sales. Wednesday brings a report on the durable goods and the Fed’s Beige Book.

Thursday’s schedule includes weekly jobless claims and pending home sales, and the week concludes on Friday with second quarter GDP, the Chicago Purchasing Managers’ Index, and University of Michigan Consumer Sentiment. If the upcoming reports reveal that the economy is continuing to sputter, the gold price is likely to remain a prime beneficiary. However, if the data exceeds economists’ expectations, the price of gold could face selling pressure.