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Updated Tuesday, August 9, 2011 0:09 am TWN, By Eric Onstad and Manolo Serapio Jr. ,Reuters



	This file picture taken on April 6, 2009 shows gold bars stacked at the plant of gold refiner and producer Argor-Heraeus in Mendrisio, in the southern Swiss canton of Ticino. The price of gold struck a record high above US$1,700 an ounce on Monday, Aug. 8, with dealers flocking to the safe haven metal as Asian stocks tumbled following Standard & Poor's Friday downgrade of U.S. debt. (AFP) Enlarge Photo

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Gold hits new peak, oil slumps on fears

LONDON/SINGAPORE -- Gold soared to an all-time high on Monday as investors sold off other commodities from oil to grains, fleeing from riskier assets after the U.S. loss of its prized AAA credit rating stoked fears about economic growth. Gold broke through the US$1,700 per ounce barrier for the first time, extending its bull run as a safe haven asset after agency Standard & Poor's (S&P) cut its rating for U.S. debt late on Friday.

Oil was hard hit, sliding over 4 percent, while industrial metals and agricultural commodities piled up losses as a deepening debt crisis in the United States and Europe fanned worries that a global slowdown would erode demand for raw materials.

A move by the European Central Bank to intervene in Spanish and Italian bond markets coupled with a pledge by G-20 members to take action to ensure market stability helped steady markets and limit the downside, but most commodities were expected to see more losses.

“In the short term investors will be very careful,” said Pau Morilla-Giner, head of commodities and senior portfolio manager at London & Capital.

“You're going to see a very high correlation with risk assets because there's still a perception that commodities are cyclical and the only area that will perform differently is the gold space.”

Commodities with supply issues such as copper and corn were still attractive in the longer term, Morilla-Giner said, and investment bank Goldman Sachs maintained its overweight recommendations on commodities relative to other assets.

The Reuters-Jefferies CRB index, the 19-commodity benchmark, shed 1.3 percent after losing nearly 4.5 percent last week, its steepest drop since a rout in early May fuelled by concerns about a stalling global economic recovery.

Benefiting from the gloom, gold climbed to an all-time high above US$1,715 an ounce, its 11th record in 19 sessions, as investors snapped up the precious metal. Gold has gained more than 20 percent so far this year.

“Everyone was talking about Armageddon at the weekend and this morning, it's held the rot but doesn't remove the themes that have been driving the stock markets,” said Saxo Bank senior manager Ole Hansen.

World shares tumbled and the euro extended losses against the dollar while the ECB action gave some respite to battered bond markets.

Investors have bought more gold in the last month than in the prior six months, based on the increase in open interest on the COMEX market from speculators and money managers, as well as inflows into exchange-traded products.

Dominic Schnider, executive director for wealth management research at UBS, said gold may even be headed to US$2,000 per ounce.

(Related story on page 5)

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