The dollar price to buy gold was trading in a tight range around $1510 per ounce on Monday morning London time – a 1% gain since the beginning of last week – as stocks and commodities fell after ratings agencies issued new warnings on Eurozone government debt.
Ruling parties in Spain and Germany, meanwhile, suffered local election defeats.
The Euro lost nearly 1% against the US Dollar in early trade, falling through the $1.40 mark.
The Euro price to buy gold, meantime, hit a new all-time high of €34,746 per kilogram (€1080 per ounce) – 1% above Friday's close. The gold price in Euros has risen 16% since this time last year.
Silver prices meanwhile remained flat – trading just under $35 per ounce, virtually unchanged from two weeks ago.
"One problem for the struggling euro zone countries is that they’ve given up currency flexibility," says Steve Barrow, currency strategist at Standard Bank. "Without the ability to lower interest rates or ease fiscal policy, the inability to devalue makes things tough."
"The week is starting in a decidedly fearful mode, with the spillover from Friday's concerns about Greek debt restructuring still dominating markets," Société Générale's head of foreign-exchange strategy Kit Juckes.
The yield on Greek sovereign debt set a new all-time high of 17% on Monday morning.
"Greece risks a sovereign default," warned French finance minister Christine Lagarde – favorite to be the next head of the International Monetary Fund (IMF) – warned on Friday. "Finance ministers have expressed strong doubts about [Greece's] sluggish progress."
"The Euro is likely to search for the bottom this week as Greek debt woes appear to be spreading to other countries," reckons Mizuho Trust and Banking trader Yoshio Yoshida.
"If the crisis starts to involve other nations beyond Greece, then we could see gold heading to a new record high," Ong Yi Ling, Singapore-based investment analyst at Phillip Futures told Reuters.
Ratings agency Fitch cut its rating on Greek sovereign debt by three grades on Friday, to BB+ to B+. On the same day, Standard & Poor's changed its outlook for Italy's debt from stable to negative, citing "potential political gridlock" and "weak" growth prospects.
Over in Spain, meantime, early results show the ruling left-wing Socialist party is heading for heavy losses in Sunday's regional elections, while tens of thousands continue to pack city streets across the country to protest against unemployment. The opposition Popular party looks to have gained 37.5% of the vote – 10% more than the Socialists.
"Should [Spain] be under severe stress, the capacity of Europe to deal with it would be put in question," says Laurent Bilke, senior economist at Nomura. "Rather than the local elections, it is more the resemblance of Madrid's Plaza de la Puerta del Sol to Cairo's Tahrir Square which is disturbing for the markets."
German chancellor Angela Merkel's party also suffered a local election defeat at the weekend, with the center-right Christian Democratic Union party finishing behind the Greens in Bremen – the first time this has happened in a state election.
