Gold prices jumped to a record high Monday, while world stocks and the euro stumbled on fears that no imminent solutions to the European and U.S. debt problems could spiral into a global economic crisis.
As worries over fiscal burdens persist, investors have been scrambling to shelter their money in cash, gold, the Swiss franc, the Japanese yen and other less-risky investments.
"There is still a great concern about the (euro zone) peripheral debt crisis and in the U.S. we have our own issues with the consensus the U.S. is on (credit) downgrade watch,'' said
Michael Woolfolk, senior currency strategist at BNY Mellon in New York. "The yen and the Swiss franc are benefiting as safe havens more than the dollar.''
Spot gold rose to an all-time peak of $1,607 an ounce after rising for an unprecedented 11th day.
Unease over a U.S. default seeped into the U.S. Treasuries market, stoking selling in longer-dated debt.
The 30-year Treasury bond lost 31/32 in price to yield 4.30 percent versus 4.25 percent on Friday.
European officials and bankers remained divided over steps to keep the fiscal woes of heavily indebted nations from spreading. The euro zone's 17 national leaders will meet
Thursday in Brussels in an attempt to finalize a second round of financial aid for Greece worth $154 billion.
"We are in the midst of a political crisis that has not offered any viable solution,'' said Jurgen Odenius, principal of international economics and investment strategy at Prudential
Fixed Income in Newark, N.J., of the European debt crisis.
In the United States, as the clock ticks toward the Aug. 2 deadline for an increase in the statutory $14.3 trillion borrowing limit, investors were nervous about the stalemate in
Washington and chances of the economy slipping into a recession only two years after the last one.
The lack of progress in negotiating a U.S. fiscal package has already led all three major ratings agencies to warn of a credit rating downgrade in the event of a U.S. default. Such a move, some traders fear, could send interest rates soaring and erode the U.S. dollar's reserve currency status.
These worries sapped U.S. stocks Monday.
The Dow Jones industrial average lost 94.57 points, or 0.76 percent, at 12,385.16. The S&P 500 Index fell 10.70 points, or 0.81 percent, to 1,305.44. The Nasdaq Composite Index was down 24.69 points, or 0.89 percent, at 2,765.11.
A sell-off in bank shares knocked European stocks down 1.7 percent to their lowest levels since early December.