Gold Flies Above $1,600 as Default Anxiety Persists

Gold climbed above the $1,600 level for the first time in history on Monday as cash continues to flood to the precious metal amid great uncertainty over Washingtons ability to avoid a potentially-crushing default.

The latest rally leaves gold at another all-time high and on track for its 10th consecutive daily gain. Gold had already picked up 7.25% over its previous nine sessions.

Gold hit the $1,600-an-ounce mark early on Monday before retreating a bit. In recent trading, gold was up $14.70 a troy ounce, or 0.91%, to $1,604.80.

Gold-related stocks such as Newmont Mining (NYSE:NEM) and Barrick Gold (NYSE:ABX) were also bid higher.

Traders have pushed gold higher amid fears Congress and the White House will be unable to reach an agreement to raise the $14.3 trillion U.S. debt ceiling before ratings companies downgrade the nations AAA credit rating or the country defaults on its obligations.

Despite weeks of exhaustive talks between lawmakers, the two sides have failed to come to a compromise. Economists have warned a default could send the U.S. into another financial crisis and even a second recession.

Ratings company Fitch said Monday it will place the U.S.s sovereign rating on watch for a downgrade if the debt ceiling isnt raised by the Treasury Departments August 2 deadline. However, Fitch said it still believes an agreement will be reached before then and the U.S. will make a full payment on all obligations.

At the same time, Europe is still dealing with its own sovereign debt crisis, which some fear will result in Greece defaulting or even being kicked out of the European Union.

With those concerns in mind, gold leaped 3.15% last week, its second-straight weekly rally and 13th of the past 17. While the metal remains 33.62% from its inflation-adjusted record of $2,395.03 that was set in January 1980, it has surged more than 34% over the past year.

However, not everyone is a believer in golds staying power.

Speculators once again have hijacked the markets and the small investor will soon pay the price, said Jon Nadler, senior analyst at Kitco Metals. Nadler said the surge has been "built on but two items which are not in the cards: EU collapse and a U.S. collapse.

The buying binge in gold stands in contrast to the action in other commodities like copper and crude oil, which are both good indicators for economic sentiments. Crude tumbled $2.31 a barrel, or 2.40%, to $95.29. Copper slid 0.67% a pound to $4.3835.

Likewise, the Dow Jones Industrial Average shed more than 150 points Monday morning and the Nasdaq Composite declined 1.2%.