The Gold Price surged to $1550 per ounce just after noon in London – up 4.2% from the start of last week – while stocks and commodities fell and US Treasury bonds gained after the president of the European Council called a crisis meeting to discuss Italy's sovereign debt.

The Euro Gold Price set a new record of €1092.12 per ounce at Monday morning's London Fix – a 1.5% jump from Friday afternoon's fix.

The Sterling Gold Price meantime came in at £966.32 per ounce – a 0.7% gain from last Friday, and also a new record.

The Silver Price meantime jumped to $36.65 per ounce – down four cents from last Friday's spot market close.

"Italy cannot afford to pay the interest rates it's paying right now," adds Andrew Bosomworth, fund manager at PIMCO, the world's largest bond fund, adding that Italy's debt will be "unsustainable" if interest rates remain at current levels.

"As yields rise and debt financing costs become even more exaggerated, the difficulties of containing the crisis become greater," says Jane Foley, senior foreign exchange strategist at Rabobank.

Yields on Italian government bonds rose to 5.4% on Monday – up from just over 4% this time last year.

Italy's stock market meantime fell sharply on Friday – with shares in its largest bank, UniCredit, down 7.8%. 

Herman Van Rompuy, president of the European Council, called an emergency meeting Monday for officials dealing with the ongoing Eurozone debt crisis. 

Among those invited to the meeting were Jean-Claude Trichet, president of the European Central Bank and Jean-Claude Juncker, chairman of the group of Eurozone finance ministers.

The Eurozone may have to double the size of its bailout fund – the European Financial Stability Facility – to €1.5 trillion to cover a potential crisis in Italy, according to German Die Welt, citing unnamed ECB officials.

Also in Brussels, European leaders are for the first time contemplating a Greek default, according to a report in Sunday's Financial Times.

Options under consideration reportedly include lower interest rates on bailout funds and a program of buying back Greek government bonds.

"The basic goal is to reduce the debt burden of Greece," the FT quotes a senior European official involved in negotiations.

Eurozone leaders are contemplating a selective Greek default "to save ammunition for later" says one Gold Bullion dealer here in London – referring to the potential crisis in Italy, the third largest economy in the single currency.

"The Eurozone sovereign debt crisis has the potential to generate major financial stresses should it end in sovereign default," says a new report from research consultancy Oxford Economics, entitled The Impact of Inflation and Deflation on the Case for Gold.

The consultancy's analysis predicts that the Gold Price should "perform especially strongly in more extreme economic scenarios featuring high inflation, a weak Dollar and elevated financial stress."

The researchers also find that gold performs well in their deflation scenario.

"Large [gold] price swings aren't to be ruled out due to the illiquidity of the summer holidays," cautions Swiss precious metals refiner MKS.

"We would beware of the build-up of speculative short positions...[which are]well above last year's average," says Marc Ground, commodities strategist at Standard Bank.

"[This indicates]a market that is less supportive — which could see the Gold Price more vulnerable to shifts in investor sentiment."

In New York meantime noncommercial "speculative" investors decreased their net long exposure to Gold Futures and options contracts – narrowing the gap between bullish and bearish positions – according to the latest data from the Commodities Futures Trading Commission.

Noncommercial investors increased their short futures and options positions by the equivalent of 5.7 tonnes of Gold Bullion.

Over in China – the world's second largest gold market – consumer price inflation rose to 6.4% in June, up from 5.5% in May.

"The higher the reading in June, the better the chance for it to peak," reckons Ting Lu, economist at Bank of America Merrill Lynch in Hong Kong.

Pork prices were the major driver behind inflation growth – rising 57.1% in the year to June.

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