New York - Gold jumped to a record high on Friday and global
equity markets extended a sharp sell-off as fears of a global recession and a
funding crunch for regional banks in Europe intensified.
Gold prices rallied more than 2.5% as investors sought
refuge from a second day of hefty losses in stocks, as equity markets reeled on
fears of stalling economic growth around the world.
Wall Street stocks opened sharply lower but then pared their
losses, with the S&P 500 and Nasdaq indices in positive territory.
“At the moment the market is just looking for relative safe
havens,” said Mitsui Precious Metals analyst David Jollie. “You can see that in
the sell-offs across equity markets overnight. The strength of gold is the
other side of the coin from that.”
Spot gold jumped to record $1 877 an ounce, and was last
trading near $1 855, on track for its biggest one-month rise in nearly 12 years
in August.
The euro recovered early losses in thin trade, gaining
momentum on stop-loss selling. But it remained at risk of coming under renewed
pressure from a darkening global economic outlook and worries about funding in
the eurozone banking sector.
The US dollar index slipped 0.6% to 73.817 as a result of a
rebound in the euro, up 0.6% at $1.4411.
European shares flirted with two-year lows, and the FTSEurofirst
300 index of top European shares was down 1.7%. MSCI’s all-country world stock
index was off 1%.
“The market is very concerned about the deteriorating
outlook for global growth in general and the United States in particular,” said
Marcus Svedberg, chief economist at East Capital, which has €5bn under
management.
On Wall Street, the Dow Jones industrial average fell
sharply at the opening, but shortly after 10:00 EDT the Dow Jones industrial
average was down 16.57 points, at 10 974.01.
The Standard & Poor’s 500
Index was up 2.93 points, at 1 143.58. The Nasdaq Composite Index was up 12.09
points, at 2 392.52.
US Treasury yields inched back up from lows last seen in at
least 60 years on as some investors took profits from Thursday’s bond rally.
The benchmark 10-year US Treasury note was down 14/32 in
price to yield 2.11%. The yield at one point on Thursday fell to 1.97%.
Yields have dropped almost a full percentage point on the
10-year note in August as disappointing economic data, the Federal Reserve’s
low interest rate policy and jitters over rising bank funding costs drove
investors to safe haven bonds.
Brent crude rose after Spanish measures to address Spain’s
economic weakness helped to reverse some of the deep sell-off triggered by
concern that the world is heading back into recession.
Brent was trading 9 cents higher at $107.08 a barrel. US crude shed 96c to $81.45/barrel.