Gold and silver prices surge as stocks in U.S. and Europe drop

Gold prices hit a record-high Monday of more than $1600 an ounce amid investor concerns about the debt crises in the U.S. and Europe. 

The Guardian reports that silver prices also jumped 2 percent to $40.11 an ounce — its highest since early May. Financial analysts expect gold and silver prices to continue rising through the week as debate over raising the debt ceiling drags on in U.S. Congress and investors grow increasingly concerned about the chances for default of Greece and other European economies such as Spain, Italy and Ireland.

Stocks in the U.S. and Europe fell more than 1 percent Monday after regulators released the results of the stress tests they conducted on 90 European banks. The results, published after the markets closed Friday, show that eight of those 90 banks failed, with an aggregate capital shortfall of 2.5 billion Euros, the New York Times reports. 

Adding to the worries, Goldman Sachs also released a report Friday cutting its 2011 forecast for the real U.S. economic growth to 1.5 percent from 2 percent in the second quarter and to 2.5 percent from 3.25 percent in the third quarter. 

Thus, investors have been seeking safe havens in precious metals — assets of choice during tough economic times. Gold prices have risen nearly 8 percent since the beginning of July, surging on July 12 when the Federal Reserve released minutes from its June policy meeting showing that the central bank was open to more fiscal stimulus, CNNMoney reports. Additional stimulus could weaken the U.S. dollar even more.

"People are coming to realize that the economy is weakening again and the government might see a need to try to stimulate the economy further," Joe Foster, portfolio manager for the Van Eck Global International Investors Gold Fund (INIVX), told CNNMoney.

Yet gold still hasn't surpassed its real record high of $825.50 on Jan. 21, 1980 — the equivalent of $2,261.33 an ounce today — when investors sought protection from double-digit inflation.