Forexpros – Last week saw gold prices surge to fresh record highs on three consecutive days as mounting fears over a potential U.S. sovereign debt default and ongoing concerns over the euro zone’s debt crisis boosted the safe haven appeal of the precious metal.

On the Comex division of the New York Mercantile Exchange, gold futures for August delivery settled at USD1,594.05 a troy ounce by close of trade on Friday, rallying 3.1% over the week. 

On Thursday, gold prices rose to a record-high of USD1,594.85 a troy ounce.

Ratings agency Standard & Poor’s said late Thursday that the U.S. faced a 50% chance of a credit rating downgrade within the next 90 days, citing the political debate over raising the country’s USD14.3 trillion debt ceiling before the August 2 deadline.

The warning came a day after rival Moody’s Investors Service said it put the U.S. government’s Aaa bond rating on review for possible downgrade due to a “small but rising risk” of a short-lived default.

Republicans in the House of Representatives said they would vote next week on a bill to raise the U.S. debt ceiling as long as Congress adopts a balanced-budget amendment, an unlikely prospect.

In Europe, Ireland became the third euro zone member to have its sovereign debt rating cut to junk status, following a downgrade by ratings agency Moody’s on Tuesday, citing the probability that the country will need an additional bailout.

Greece’s credit rating was cut three levels by ratings agency Fitch on Thursday to its lowest grade for any country in the world, saying that a default was a “real possibility.”
Fears that the region’s debt crisis would spill over to Italy saw the cost of insuring Italian government debt against default rise to a euro lifetime high.

Gold is often seen as an alternative currency in times of global economic uncertainty.

Meanwhile, Federal Reserve Chairman Ben Bernanke told Congress on Wednesday that the central bank was examining several untested means to stimulate growth if conditions deteriorate, including another round of asset purchases or quantitative easing.

However, in the second part of his congressional testimony on Thursday Bernanke said that that inflation was “higher” and “closer” to the central bank’s informal target than was the case in August 2010, damping speculation the Fed will take additional action to spur the economy.

Elsewhere, silver for September delivery traded at a nine-week high of USD39.27 a troy ounce by close of trade on Friday, surging 6.6% over the week, as investors sought a cheaper alternative to gold.

In the week ahead, euro zone finance ministers are to meet Thursday to focus on “the financial stability of the euro area as a whole and the future financing of the Greek program,” according to the president of the European Council, Herman Van Rompuy.

Markets will also be paying close attention to any developments in regards to the U.S. debt ceiling talks as well as a congressional testimony from Federal Reserve Chairman Ben Bernanke.