Gold rises above $1,600/oz as debt fears simmer - the professionals have returned to gold with a vengeance

Gold prices rallied to record highs above $1,600 an ounce in Europe on Monday as investors spooked by the euro zone debt crisis and the threat of a U.S. default bought into the metal as a haven from risk. Spot gold rose as high as $1,600.40 an ounce and was up 0.4 percent at $1,598.76 an ounce at 0845 GMT. Gold rose more than 3 percent for a second straight week to Friday, a feat it has not achieved since February 2009. Data from U.S. futures regulator the Commodity Futures Trading Commission showed on Friday that managed money sharply raised bullish bets in U.S. gold futures and options in the week ended July 12 as bullion prices rallied. "The stress test result was met with a lukewarm response with focus again switching back to Europe. When that happens gold is often allowed to perform despite the dollar strengthening at the same time." "CFTC data shows a surge into gold, so despite the higher levels the professionals have returned to gold with a vengeance," said Saxo Bank analyst Ole Hansen.

"Investors are increasingly looking to gold as a safe haven as the U.S. dollar, pound sterling and the euro continue to devalue against stronger currencies such as those of Canada, Australia, Norway and Switzerland," said Angelos Damaskos, chief executive of Sector Investment Managers. "Sovereign debt problems in the developed world persist and continue to hamper economic growth. Quantitative easing is the easy solution but rising inflation creates a headache for central bankers."