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Gold prices hit a new high above $1600 on Monday as a result of a powerful cocktail of economic uncertainty, difficult US deficit ceiling negotiations, European Union sovereign debt concerns and the threat of contagion to the banking sector.

Taken singly, the US debt ceiling impasse or the ongoing EU sovereign debt crisis would be sufficient to trigger a gold rally. But together, the affect on gold prices is even more bullish, as investors become wary of USD and EUR assets and seek a safe haven in gold. Based on this, we believe the bullion rally is likely to continue until tangible progress is made on relieving at least one of the sovereign debt issues.