By Alix Steel
NEW YORK (TheStreet) — Gold prices were soaring to record highs Wednesday as investors rushed to the safe haven after House Speaker John Boehnerâ€™s debt plan hit a brick wall.
Gold for August delivery was adding $9.20 to $1,626 an ounce at the Comex division of the New York Mercantile Exchange. The gold price has traded as high as $1,626.80 and as low as $1,617 while the spot gold price was rising $7.10 according to Kitcoâ€™s gold index. Silver prices were climbing steadily higher as well, up 70 cents to $41.40 an ounce. The U.S. dollar index was adding 0.18% at $73.65 while the euro was shedding 0.22% vs. the dollar.
The House of Representatives had been gearing up to vote on Speaker Boehnerâ€™s debt plan in which the debt ceiling would be raised in two tranches based on spending cuts, but the plan hit a snag. The Congressional Budget Office said that his plan to cut $1.2 trillion over 10 years fell almost $400 billion short. This puts the Senate Democrat plan front and center, which also must face Budget Office scrutiny.
Although most experts think that a high gold price does not reflect a U.S. default, uncertainty over an agreement is a green light for investors to buy gold.
David Banister, chief investment strategist at ActiveTradingPartners.com, thinks that gold will hit $1,730 in a few weeks and maybe even soar to $1,800 an ounce. Banister doesnâ€™t think the U.S. will default, however, but that global fiscal issues and negative real interest rates — the interest rate minus inflation — will continue to support high gold prices.
â€œAny reaction to the downside on gold will be temporary,â€ argues Banister. â€œTraders might be unwilling to make a commitment until they see the short term reaction,â€ explaining why gold hasnâ€™t skyrocketed, â€œbut I would say any short term pullback in gold on successful debt talks I would be a buyer.â€
Stan Dash, vice president of applied technical analysis at TradeStation, also sees prices at $1,730. Dash, in measuring rallies since goldâ€™s low in October of 2008, says that gold can typically move 20% in a leg of a bull market. A move to the $1,730 level would be a 17% rise from the May support level of $1,480 an ounce. â€œYou canâ€™t argue with price,â€ says Dash. â€œItâ€™s making new highs. Itâ€™s still a bull marketâ€