GOLD has settled above $US1600 for the first time as debt...

GOLD has settled above $US1600 for the first time as debt concerns in Europe and the US elevated investor demand for a safe-haven investment.

The most actively traded contract, for August delivery, gained $US12.30, or 0.8 per cent, to settle at a record $US1602.40 a troy ounce on the Comex division of the New York Mercantile Exchange.

Gold futures have marched higher for 10 consecutive trading days as investors stocked up on the refuge asset amid escalating concerns about government debt.

In Europe, Greece is hoping to secure a second bailout package from fellow euro-zone members to help the debt-laden country avoid a default. Concerns have also emerged about Italy's financial health and the possibility that Spain will also need a bailout.

Meanwhile, better-than-expected European bank stress-test results, released last week, failed to soothe markets as they didn't ascertain whether the institution could withstand a government debt default.

European leaders are now scheduled to attend an emergency summit on Thursday to discuss these issues.

In Washington, politicians are no closer to a deal on raising the national debt ceiling. The Treasury has set an August 2 deadline, after which it will run out of funds to meet all of its payment obligations.

"If you're concerned about either the euro-zone or US debt issues, there's a reason to buy gold," Mitsui analyst David Jollie said.

Gold's march above the psychologically important $US1600 mark is likely to draw interest from investors who place bets based on patterns in trading activity, market participants said.
Some investors look to gold's performance near such round numbers as a sign of the market's momentum.

Gold has broken through several such critical levels since worries mounted last year about the financial health of the European Union. Comex gold futures have surged 44 per cent since worries about Greece's fiscal situation began to pile up at the beginning of 2010.

Even as gold surges to record-high territory, "investors see enough uncertainty in the world to warrant further gold purchases," said George Gero, vice-president with RBC Capital Markets Global Futures. "There's more distrust of the political process, and we're on debt-ceiling and euro-zone watch."

Some investors buy the yellow metal on the belief that it holds its value better than other assets during economic turmoil, and big-picture economic worries have sent gold on a steep rally in recent weeks.

The amount of gold held by exchange-traded funds, popular tools for investors to gain exposure to gold, reached a record high Friday at 2156 tonnes, according to Barclays Capital.

"Both short-term and longer-term interest has turned significantly positive over recent sessions," Barclays analyst Suki Cooper said in a note.