Fears that the U.S. will default on its loans if Congress doesn’t raise the debt ceiling combined Monday with anxiety about the Euro-zone debt crisis to drive the price of gold past $1600 for the first time in history:
At $1600.40 an ounce, gold has risen by nearly 8% since the start of July. Economists believe it will keep climbing and could spike sharply if the Euro-zone breaks up or America fails to raise its debt ceiling this week.
“If people seriously thought that there was a good chance that the euro itself would not survive, the associated flight to the safety of gold could easily see prices surge well above $2,000,” said analysts at Capital Economics, who predict that gold will pass though the $2,000 mark in 2012.
“If an actual break-up were imminent, we would pencil in a much higher figure. The fallout from a temporary default by the US government would be less serious, although it would probably see gold prices spike higher, too.”
Whereas in the United States there is an easy fix–Congress votes to raise the debt ceiling (as it did several times while under Republican control during George W. Bush’s presidency) and avoid the first default in U.S. history–the situation in Europe is more confused, with policymakers desperately trying to contain Greek’s debt crisis and prevent it from spilling over into other vulnerable economies, like those of Spain and Italy.
Unfortunately, there seems to be a certain segment of the American Right that is obsessed with gold, and it overlaps with those who oppose raising the debt ceiling. Perennial GOP Presidential candidate Ron Paul is among them. In the below clip, he spars with Ben Bernanke, Chairman of the Federal Reserve, on whether gold is, in fact, money:
Paul harkens back to the days when gold was money, women couldn’t vote or participate meaningfully in economic or social life, and people hunted and gathered the good old fashioned way.