Gold price hits all-time high on US debt concerns

The price of gold has risen to a fresh all-time high of $1,594.16 an ounce, and the dollar has fallen, on concerns the US may default on its debts.

The moves came after ratings agency Moody's said it may cut the debt rating of the US, warning there was a "rising possibility" it will default.

To avoid default, US politicians have to agree to raise the country's debt limit by 2 August.

Democrats and Republicans are currently in dispute over how best to do this.

The spot price for gold rose to a record high of $1,594.16 an ounce in Thursday trading, before easing to $1,590.66.

Gold is seen as the number one haven purchase in times of economic uncertainty, but analysts said its rise was also caused by the fall in the dollar, which makes the precious metal more affordable for holders of other currencies.

Against the Japanese currency the dollar fell to 78.45 yen at one point, its lowest level since March, before recovering to 79.00 yen.

The dollar also declined against the European single currency, down 0.2% to 0.70430 euros. The greenback also fell slightly against the pound, with sterling rising 0.1% to $1.61240.

European share indexes were slightly lower in Thursday trading, with both Germany's Dax and the UK's FTSE 100 down 0.4%. Japan's Nikkei earlier lost 0.3%.

The market falls were limited because investors assume that US policymakers will eventually do a deal to prevent a default, BBC business editor Robert Peston concluded.

They believe that President Obama and the Republicans will reach an accommodation on spending cuts that would allow the amount that the state can borrow to be increased, he said.

Federal Reserve chairman Ben Bernanke warned that a default by the US on its debt would cause a "major crisis". Speaking before Congress on Wednesday, he said it "would send shockwaves through the entire financial system".