NEW YORK (AP) - The price of gold streaked past $1,700 an ounce for the first time Monday. Anxious investors sought safety in the metal as stocks tumbled around the world after the U.S. lost its AAA credit rating.
Gold's allure stems in part from fears that the world's major economies are dangerously indebted. Its value, unlike that of a currency, doesn't hinge on whether countries can make their bond payments.
Standard & Poor's on Friday cut the long-term credit rating for the U.S. by one notch to AA+, deepening investor fears about a weakening U.S. economy. The move may have been expected, but economists say its impact is still unclear, and the downgrade could hurt the economy. For example: Rates on mortgages could rise, further damaging the U.S. housing market.
"The U.S. and global economy are in a feeble "rehab' recovery and a trifecta of shocks has hit the economy - surging oil prices, the Japan disruption and the debt crises in Europe and the U.S," wrote Ethan Harris, a Bank of America Merrill Lynch economist.
A debt crisis in Europe threatens to destabilize financial markets. Investors are worried that Spain or Italy, two of the world's major economies, could get priced out of the bond markets and default on their debts.
That's one reason why gold has appealed to investors in the aftermath of the Great Recession. While the euro currency has been pressured because of concern that European countries could default, the value of gold isn't tied to any country's balance sheet.
Gold soared $61.40, or 3.7 percent, to settle at $1,713.20 on Monday. It reached a record high of $1,723.40 per ounce during the day.