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Gold, Silver Prices Surge on Debt Deadlock

NEW YORK ( TheStreet ) -- Gold prices were once again catapulting to highs after Washington's deadlock on the debt showed no signs of breaking over the weekend.

Gold for August delivery was adding $11.40 to $1,612.90 an ounce at the Comex division of the New York Mercantile Exchange. The gold price has traded as high as $1,624.30, and as low as $1,603.80 while the spot gold price was popping $11.30, according to Kitco's gold index.

Silver prices were following gold higher, with the September contract up 28 cents to $40.40 an ounce. The U.S. dollar index was down 0.1% at $74.15.

"Debt ceiling talks and resulting weak stocks were bringing gold investors to increase positions as indeed new open interest this month has jumped to 545,000 contract in gold futures on Comenx," said George Gero, senior vice president with RBC Wealth Management. Gero warns that the run-up in prices may set investors up for a loss as the end of the month approaches. "Too many new longs at recent high prices and a cautionary note is missing from all prevailing sentiments."

"Markets are spooked by the political theatre which continued in Washington over the weekend," said a report from precious metals dealer GoldCore. "An eleventh-hour solution is expected before next Tuesday's August 2 deadline, when the U.S. Treasury has said that it would not be able to borrow any more funds. At the same time, investors have cut their exposure to risky assets and the appalling fiscal situation in the U.S. is positive for gold and silver -- whether the politicians come to an agreement or not."

Gold mining stocks were mixed. Kinross Gold (KGC - Get Report) was down 0.8% to $17.44, while Yamana Gold (AUY - Get Report) was adding 0.8% at $13.54. Agnico-Eagle (AEM - Get Report) was losing 1.5% to $62.36, and Eldorado Gold (EGO - Get Report) were trading up 0.8% at $18.80. The SPDR Gold Shares (GLD) was 0.5% higher at $156.99.

-- Written by Ross Tucker in New York.

>To contact the writer of this article, click here: Ross Tucker.

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