The Gold Price surged to $1602 per ounce Monday morning in London – a new intraday record – while stocks and commodities fell as politicians on both sides of the Atlantic appeared no closer to resolving their respective debt problems.

Silver Prices also jumped, up to $40.38 per ounce – 2.8% higher from Friday's close.

The Gold Price also set new records in Euros and Sterling at Monday morning's London Fix.

With the Dollar price set at $1598.25 per ounce, Euro and Sterling Gold Prices were €1136.33 per ounce and £992.82 respectively.

"The market has been very firm for precious metals this morning. Silver led the charge and gold followed steadily," says one bullion dealer in Hong Kong.

"Gold Prices have hit fresh highs across several currencies on macro unease, the Dollar weakening and the escalation of European sovereign debt uncertainty," adds a research note from Barclays Capital.

US President Obama is due to continue discussions with leading members of Congress on Monday in an effort to find a solution to the ongoing debt ceiling issue.

Republicans want measures to reduce the federal deficit in return for voting to increase the $14.3 trillion borrowing limit – which the US Treasury says it will hit on August 2.

"[The Democrats] are never willing to be specific about the reductions in spending that they would be willing to do," said Republican senator Jon Kyl on Sunday.

Republicans have proposed a "cut, cap and balance" plan – which would involve a constitutional amendment requiring the US government to balance its budget each year.

Republican congressman John Boehner, speaker of the House, described the proposal Friday as "a solid plan for moving forward".

Some economists, however, fear that such an amendment could exacerbate future recessions – since falling tax revenues would have to be offset by spending cuts.

"It's exactly the opposite of what intelligent fiscal policy should do," Dan Seiver, professor of finance at San Diego State University told Reuters.

Should the balanced budget proposal not pass Congress, a possible "Plan B" revolves around Republican Senator Mitch McConnell's suggestion that Congress simply be allowed to vote against raising the debt ceiling.

Obama could then veto their decision, which would require a two-thirds majority in Congress to overturn.

"If we're unable to get an agreement [McConnell's idea] might look pretty good a couple of weeks from now," said Boehner.

Data published Friday revealed US consumer confidence at its lowest level since March 2009.

Over in Europe, German chancellor Angela Merkel said Sunday she will only attend Greek bailout talks in Brussels "if there is a result."

Merkel reiterated Germany's desire to see private creditors share the burden of any rescue, telling German television that the greater the private sector contribution, "the less likely it will be that further steps are needed."

However, European Central Bank president Jean-Claude Trichet repeated the ECB's position on defaulted sovereign bonds in Monday's Financial Times Deutschland.

"If a country defaults, we will no longer be able to accept its defaulted government bonds as normal eligible collateral."

The European Banking Authority published the results of stress tests on Friday, showing that 8 out of 90 banks had insufficient capital to cope with given potential crises – with the aggregate shortfall estimated at €2.5 billion. 

One bank, Germany's Helaba, pulled out of the tests last Wednesday.

The tests have been criticized for not considering the impact of a Greek sovereign default.

"This move in gold still has momentum, as Europe is burning to the ground," one US based trader told Reuters.

Over in New York meantime figures from the Commodities Futures Trading Commission for the week ended July 12 show a 26% rise in the net long position of so-called speculative Gold Futures and options traders on the COMEX – institutional traders defined as non-commercial. The net long figure is a measure of how bullish futures traders are on aggregate.

Speculative long positions in Gold Futures and options rose to the equivalent of 878.4 tonnes – the highest level in ten weeks, but only 2% above the average over the last 12 months – while speculative short positions climbed to 143.7 tonnes.

"We would beware of the continuing build-up of speculative short positions," warns Marc Ground, commodities strategist at Standard Bank.

"[These are] way above last year's average...indicating a market that is less supportive – which could see the Gold Price more vulnerable to shifts in investor sentiment."