GOLD hit a new record of $US1624.07 an ounce today as concerns grew over stalled negotiations on raising the US debt ceiling.

The yellow metal, which investors consider a safer bet during uncertain times when other assets are expected to fall in value, rose sharply in early Asian trading, prompting some profit-taking by investors.

“Generally . . . when it runs up quickly, we see quite a few people coming and taking profits,” said IG Markets strategist Ben Potter.

Gold prices fell back slightly in later trade because of profit-taking. At 5pm AEST, gold was selling at $US1617.55 an ounce, up $US22.88.

Silver, which had been heavily sold off in May, also traded higher in Asia yesterday, reaching $US40.72 an ounce, up $US1.10, at 5pm AEST.

Platinum was $US5 higher at $US1794 while palladium gained $US1.88 to $US807.50.

US congressional leaders remained divided on the weekend on how to cut the deficit and raise the debt ceiling, with a possible US default looming in less than two weeks. A failure to reach an agreement on the debt issue by the August 2 deadline would leave the world’s largest economy facing a potential default and a likely credit downgrade from all three ratings firms.

Traders and analysts said they expected a deal on raising the US debt ceiling to be pulled off at the last moment, because the consequences of letting the US default on its debt is “almost incomprehensible”.

Barclays Capital said in a note that concerns over US debt as well as higher inflation expectations amid a low interest rate environment set a “fertile backdrop for gold prices” to rise, barring any temporary correction.

High prices, however, have led to an increase in the supply of recycled gold into the market.

India, one of the biggest gold consumers, had seen a sharp spike in old jewellery sales, said MNC Bullion director Daman Prakash from Chennai in south India.

He said old jewellery sales were limited earlier in the year. Increased scrap supply had brought fresh sales to a near standstill.

Mr Prakash said demand for silver also remained low in the subcontinent as traders who bought the metal at high prices during the previous rally in April had been reluctant to offload the stocks at prices below $US50/oz.

“Traders are just (focusing) on gold and silver today,” a Hong Kong-based trader said.

He said he expected platinum and palladium to continue trading sideways.