Euro sinks as gold and silver soar on debt fears, Fed

By Manuela Badawy

NEW YORK (BestGrowthStock) – The euro tumbled against the dollar on Monday, gold rose to a record high and silver hit a 30-year high as fears remained about Europe’s sovereign debt problems amid speculation the United States may extend monetary easing.

Investors rushed to buy gold and silver, pushing spot gold prices to an all-time high at $1,429.40 an ounce, and driving U.S. silver futures front-month contract above $30 an ounce for the first time since 1980.

On Wall Street, the Dow and the S&P 500 ended slightly lower as investors took profits while oil futures closed at their highest in more than two years near $90 a barrel.

U.S. Treasury debt prices rose, prompted by safe-haven bids after Federal Reserve Chairman Ben Bernanke said on Sunday the Fed may buy more than the $600 billion in U.S. government bonds it has committed to purchase, if the economy failed to respond.

“The U.S. showed you need to take extremely strong actions to overcome the threat of a broad financial crisis,” said Rick Meckler, president of investment firm LibertyView Capital Management in New York.

“The feeling was Europe has only gone about two-thirds of the way, and there was some hope they will go to a full- throttle protection plan.”

Euro-zone finance ministers met on Monday amid pressure to increase the size of a 750-billion-euro ($1 trillion) safety net for debt-stricken members in hopes of halting potential contagion to other countries.

But EU paymaster Germany, Europe’s biggest economy, rejected any such moves and also dismissed a call by two veteran finance ministers for joint euro bonds guaranteed by all governments.

Last week, Ireland became the second country after Greece to require an EU/IMF financial rescue. Some diplomats say putting more money on the table now might be interpreted as a sign that the EU is preparing for a possible bailout of Spain, the euro zone’s fourth-largest economy, and could aggravate market tensions.

Stocks and the euro have moved in tandem of late with the euro looked at as a proxy for regional debt concerns.

The Dow Jones industrial average (.DJI: ) slipped 19.90 points, or 0.17 percent, to close at 11,362.19. The Standard & Poor’s 500 Index (.SPX: ) fell 1.59 points, or 0.13 percent, to 1,223.12. But the Nasdaq Composite Index (.IXIC: ) ended up 3.46 points, or 0.13 percent, at 2,594.92.

The pan-European FTSEurofirst 300 index of European shares (.FTEU3: ), added 0.13 percent to end at 1,105.41 as the shares of major oil companies got a lift from strong crude prices.

U.S. crude oil futures posted their highest close in more than two years, gaining 19 cents, or 0.21 percent, to settle at $89.38 a barrel. Oil prices got a lift from Bernanke’s comments raising the possibility of more quantitative easing, as well as from a cold spell in Europe and in parts of the United States that created greater heating demand.

The MSCI world equity index (.MIWD00000PUS: ) shed 0.11 percent to 321.78, while the December futures contract for the Nikkei 225 stock index trading in Chicago fell 145 points to 10,175.

EURO DROPS, COMMODITIES SOAR

The euro fell (Read more about the trembling euro. ) 0.84 percent to $1.3300, its first decline in four sessions, as euro-zone finance ministers come under pressure to find a common approach to ease the region’s debt crisis after an 85-billion-euro aid package for Ireland failed to calm markets.

The dollar gained against a basket of currencies, with the U.S. Dollar Index (.DXY: ) up 0.34 percent at 79.654. Against the Japanese yen, the dollar was up just 0.02 percent at 82.65 from a previous session close of 82.620.

Meanwhile, spot gold prices rose to an all-time high at $1,429.40 an ounce and U.S. silver futures climbed above $30 an ounce, the highest level since 1980, on worries about the European debt crisis.

“If you have money to put somewhere, you can either put it in one of the smaller currencies like Canadian dollar or Swiss franc or you can put it in an alternative currency like gold or silver, and that’s what is happening here,” said Sterling Smith, an analyst at Country Hedging Inc., in St. Paul, Minnesota.

“I can see that continuing. Until I see real resolution to the European debt crisis, money will find its way into precious metals.”

U.S. Treasury debt prices rose, yet gains were limited as investors prepared for this week’s $66 billion in coupon-bearing supply. Traders have also been selling into strength, either to lock in short-term profits or to unwind earlier positions tied to the Fed’s latest quantitative easing program, dubbed QE2.

The benchmark 10-year U.S. Treasury note climbed 23/32 in price, with the yield at 2.926 percent. The 2-year U.S. Treasury note rose 3/32, with the yield at 0.429 percent. The 30-year U.S. Treasury bond shot up 1-10/32, with the yield at 4.237 percent.

(Reporting and writing by Manuela Badawy; Additional reporting by Leah Schnurr, Richard Leong and Wanfeng Zhou in New York, and Mike Peacock, Alex Lawler and Jan Harvey in London; Editing by Jan Paschal)

Euro sinks as gold and silver soar on debt fears, Fed