GLOBAL MARKETS-Gold at record; stocks, oil fall after Bernanke

Thu Jul 14, 2011 4:32pm EDT




* Gold at record in wake of Moody's warning on U.S. debt * Bernanke says Fed not ready to act yet, weighs on market * U.S. stocks fall, along with oil

(Updates with U.S. stock, gold closing levels) By Caroline Valetkevitch NEW YORK, July 14 (Reuters) - Gold prices hit a record high

on Thursday in the wake of Moody's warning that the U.S.

government may lose its top credit rating, while stocks and oil

prices fell after the Federal Reserve chief dampened hopes of

further economic stimulus. Fed Chairman Ben Bernanke reiterated on Thursday that the

U.S. central bank would be prepared to inject more stimulus

into the system if the U.S. economy worsens, but told a U.S.

Senate committee that the time had not come yet and noted

inflation had picked up since late 2010. For details, see

[ID:nN1E76D0IG] While Bernanke's comments broadly pushed commodities lower,

gold rallied on a safe-haven bid after Moody's warning late

Wednesday, which was the latest jolt to investors who are

already on edge about the spreading debt crisis in the euro

zone. The credit rating agency said it could strip the world's

biggest economy of its coveted AAA credit status on the growing

risk that it could default because Washington has not reached a

deal to raise its $14.3 trillion debt ceiling. For details see

[ID:nLDE76D01W] The U.S. Treasury has warned that after Aug. 2 it will not

have enough money to pay all of the country's bills if a deal

is not reached over cutting the fiscal deficit to allow the

debt ceiling to be raised. Spot gold XAU= touched a record high of $1,594.16, and

was up 0.3 percent at $1,586.11 an ounce. U.S. gold futures

GCQ1 for August delivery settled up $3.80 an ounce. The precious metal posted its ninth straight daily rise,

its longest run of gains since October 2006, notching total

gains for the period of more than 7 percent. "This is more about fear, about the dollar, the debt

troubles in Europe, as well as the possible downgrade of the

U.S. credit rating by Moody's," said Commerzbank analyst Eugen

Weinberg. "For gold, this is (one of) the best times." BERNANKE WEIGHS ON MARKETS U.S. stocks fell after Bernanke backed off hints that

additional near-term stimulus could be on the way, removing a

possible catalyst from a market already facing plenty of

obstacles. Wall Street had snapped a three-day losing streak on

Wednesday after comments by Bernanke, in his first of two days

of testimony before Congress, suggested that the Fed could be

ready to act again to support the economy. "Bernanke has backed off considerably from what might have

been more stimulus, and that made yesterday's rally like eating

sugar for lunch: nothing more than a short burst of energy,"

said Kent Engelke, chief economic strategist at Capitol

Securities Management in Richmond, Virginia. The Fed chairman also renewed his warning that a United

States debt default would be devastating for the U.S. and

global economies. The Fed ended its most recent asset-purchase program in

June. Traders said another round of easing would flood the

financial system with yet more money and encourage investors to

reach for higher-yielding currencies and assets. The Fed's easy money policies since 2008 have helped

bolster stocks. The Standard & Poor's 500 index is up about 95

percent from its March 2009 closing low. Technology stocks led the losses on Wall Street on

Thursday. At the close, the Dow Jones industrial average .DJI was

down 54.49 points, or 0.44 percent, at 12,437.12. The Standard

& Poor's 500 Index .SPX was down 8.85 points, or 0.67

percent, at 1,308.87. The Nasdaq Composite Index .IXIC was

down 34.25 points, or 1.22 percent, at 2,762.67. World stocks as measured by MSCI .MIWD00000PUS were down

0.7 percent while the FTSEurofirst 300 .FTEU3 ended down 0.9

percent. In Asia overnight, Japan's Nikkei .N225 ended down

0.3 percent. In the foreign exchange market, the U.S. dollar was up 0.02

percent against a basket of currencies .DXY. Both the euro

EURCHF=EBS and dollar CHF=EBS at one point hit record lows

against the Swiss currency as investor demand for the

traditional safe haven remained elevated. OIL SLIDES Oil prices dropped in volatile trading following Bernanke's

comments. On the New York Mercantile Exchange, August crude CLQ1

fell $2.36, or 2.41 percent, to settle at $95.69 per barrel,

trading from $94.53 to $98.88. Thursday's slip was the biggest

one-day percentage loss since July 8. ICE Brent August crude LCOQ1 went off the board after

falling 46 cents to settle at $118.32. U.S. Treasuries prices slipped as well, with benchmark

10-year Treasury notes US10YT=TWEB trading 20/32 lower in

price to yield 2.96 percent, up from 2.88 percent on Wednesday

afternoon. "The potential downgrade of U.S. debt caused the market to

sell off a little bit overnight, but given all the headlines

concerning the potential downgrade, the markets are trading

extremely resiliently here, and I would not be surprised if

once we digest this bit of supply we continue to motor toward

lower yields," said Scott Graham, head of government bond

trading at BMO Capital Markets in Chicago.

(Additional reporting by Jeremy Gaunt, Nia Williams, Jon

Harvey and Atul Prakash in London, and Frank Tang, Robert

Gibbons, Ryan Vlastelica in New York; and Andy Sullivan and

Deborah Charles in Washington; Editing by Leslie Adler)