Price of gold rose to as high as $1,557.20 per ounce this morning!

The gold price climbed $9.11 to $1,553.31 Monday amid growing fears over the European sovereign debt crisis. The price of gold rose to as high as $1,557.20 per ounce this morning, just 1.3% shy of its $1,577.40 all-time record high, reached on May 2 of this year. Equity markets around the world tumbled, while U.S. exchanges were set to open substantially lower.

Alongside the gold price, the U.S. dollar was one of the few asset classes moving higher on Monday. The euro currency came under considerable pressure against the dollar, falling 1.4% to 1.4022. Silver prices held near unchanged at $36.71 per ounce, while cyclical commodities including oil and copper suffered steep declines.

Coupled with the worse than expected jobs report in May, the June data has already led to calls for the Federal Reserve to implement a third round of quantitative easing (QE3). Chairman Ben Bernanke has on many occasions highlighted the crucial impact that the nonfarm payroll reports have on monetary policy, and the latest data is likely to cause the Fed to maintain its dovish stance for longer than previously anticipated. This view became evident on Friday in the Fed Funds futures market, where the likelihood of a Fed rate hike by mid-2012 declined from near 30% to 8%.

Negative real interest rates has been one of the most significant catalysts behind the gold price rally in recent years. With the Fed now expected to keep rates on hold for the foreseeable future, the price of gold is likely to receive an even stronger tailwind. Furthermore, as hedge fund magnate Eric Sprott predicted earlier this week, if the Fed does indeed launch QE3, the gold price could very well explode to the upside.

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