Gold hits record high on concerns over US

Gold powered to a record high for a third time in four days and US crude dropped to five-week lows yesterday as concerns over the fragile US economy and a widening euro debt crisis drove investors away from riskier assets. Completion of a last-gasp deal to avoid a US default failed to bring any relief, as markets focused instead on how Washington's efforts to cut spending could slow growth at a time when global industrial activity was already sluggish. Moody's Investors Service and Fitch Ratings retained their triple-A rating for the United States, but said more deficit-reduction measures are needed for the government to put its finances in order and keep the coveted rating. Moody's assigned a negative outlook to the rating, underscoring the threat of a future downgrade that would drive up the cost of borrowing, while Fitch said it was not ruling out the possibility of doing the same. Article continues below "The deficit is still a big problem and that is creating financial fear," said Ken Hasegawa, a commodities derivatives manager at Japan's Newedge brokerage. "Even if the debt ceiling issue in the United States has been cleared, that is only successful in that it avoids a default." Spot gold rose to an all-time high of $1,671.39 an ounce by 0705 GMT, hitting its ninth record in 16 trading sessions and up more than 17 per cent so far this year as investors flocked to the safe haven. US gold climbed to a record of $1,674.60. Sterling- and euro-denominated gold also hit all-time highs. "The momentum in gold in the short term will continue to run strong, supported by worries about global economic growth, gold purchases by South Korea's central bank announced yesterday and rises in SPDR Gold Trust holdings," said Li Ning, an analyst at Shanghai CIFCO Futures. Crude fell to a five-week low on growing worries that major economies may slip back into recession and cause a downturn in oil demand. US crude fell 95 cents to a session-low of $92.84, its weakest since June 29. Brent slid $1.06 to $115.40 a barrel. US consumer spending fell in June for the first time in nearly two years and incomes barely rose, adding to signs that the world's biggest economy lacked momentum as the second quarter drew to a close, data on Tuesday showed.