Standard & Poor's on Friday cut the long-term credit rating for the U.S. by one notch to AA+ from AAA, deepening investor fears about a weakening U.S. economy. The move was widely expected, but it could hurt the economy. Rates on mortgages and credit cards could rise for American consumers already struggling with high unemployment.
Seeking to avert panic spreading across financial markets, the finance ministers and central bankers of the Group of 20 industrial and developing world issued a joint statement Monday saying they were committed to taking all necessary measures to support financial stability and growth.
Debt problems aren't confined to the U.S. A crisis in Europe threatens to destabilize financial markets. Investors are worried that Spain or Italy, two of the world's major economies, could get priced out of the bond markets and default on their debts.
Gold has value because, unlike the euro currency, its worth doesn't hinge on whether European countries can pay back their debts.
The metal has shot higher as the appeal of the dollar - the world's biggest reserve currency, traditionally an investor safe haven - has ebbed. The dollar has lost some of its allure because of concerns about the country's ability to pare its debt load, the flagging recovery and measures the Federal Reserve has taken to support the economy.
Gold's price has nearly doubled in price since the start of 2009.
Gold shot up $48.20, or 2.9 percent, to $1,700 in Monday morning trading after peaking earlier at a record high of $1,718.20 per ounce.
Still, adjusted for inflation, an ounce of gold remains below its 1980 peak of $850, which translates into $2,400 in today's dollars.