Gold Prices Surge To New Highs

Consumers who sold their gold jewelry last week may wish they had waited a few days. The price of the precious metal has surged this week amid signs of economic weakness in the U.S. and Europe.

The New York price of gold at midday was up $26 to $1,668 an ounce. It's up over $50 an ounce so for this week.

While gold prices have been surging, stock prices have been tanking. Wall Street has taken a beating this week, virtually ignoring the resolution of the much-worried-about debt ceiling debate and instead focusing on future growth prospects.

It hasn't happened overnight

Gold prices have been going up for years, but the sudden acceleration takes place against a backdrop in which the U.S. Congress waged an contentious debate before finally increasing the U.S. borrowing limit. As that vote was nearing its deadline, daily economic data suggested U.S. economic growth is slowing down, much faster than anyone expected. A growing number of economists concede the possibility the U.S. could slip into a double-dip recession.

Investors aren't the only ones loading up on gold. It was revealed this week that South Korea's central bank bought the precious metal. It's noteworthy because the bank had not bought gold in the last 13 years.

Flight to safety

"People want gold for safety," Frank Lesh, a trader at FuturePath Trading LLC in Chicago, told Bloomberg News.

Weakness in the dollar and the euro is also sending investors to gold, which even at its record level seems cheaper than some of the “safer” currencies, like the Swiss Franc.

Will gold go even higher or is it a bubble that one day will burst?

Many analysts think gold still has plenty of room to run. They note that in 1979, gold prices peaked at over $800 an ounce. Adjusting for inflation, an ounce of gold in 1979 should cost over $2,500 today.