Gold moved up to its record highs on Monday as the talks over US debt ceiling are heating, and concerns over US possible default are growing.

While most investors believe a deal will be done, nervousness ahead of the decision is still pressuring the dollar, lifting U.S. Treasury yields and benefiting gold.

"This has reminded people of the risks involved in government bonds," said Mitsubishi analyst Matthew Turner. "For some investors, gold is a competitor as a safe-haven asset."

"If a deal is done, as I expect, the gold price will come down," he said. "It might go higher first, though."

Spot gold hit a new peak at $1,622.49 an ounce and was up 1.2 percent at $1,618.40 an ounce at 0849 GMT.

Hedge funds and other large speculators last week boosted their bullish bets in U.S. gold futures to the highest in nearly two years as gold rallied on the euro zone's debt crisis and uncertainties around the U.S. debt talks.

Managed money in COMEX gold added 16,135 lots in the week ended July 19, boosting their net long position to 238,319 lots, which marked the highest holding for the key speculator group since the week of Oct. 18, 2009.

U.S. gold futures for August delivery were up $16.90 an ounce at $1,618.40, off a high of $1,624.30.