Gold at record; stocks, oil fall after Bernanke

A man looks at an electronic board displaying various market indices from around the world outside a brokerage in Tokyo May 16, 2011.

NEW YORK (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.

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.

The Treasury has warned that after August 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 touched a record high of $1,594.16, and was up 0.3 percent at $1,586.11 an ounce. U.S. gold futures 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 and dollar 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 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 went off the board after falling 46 cents to settle at $118.32.

Treasuries prices slipped as well, with benchmark 10-year Treasury notes 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)