Bank agony, money squeeze batter stocks, dollar

Investors dived into safer assets. Spot gold hit $1,030 an ounce, before falling back to around $1,022 an ounce.

"Gold will be the main beneficiary (of the falling dollar) as a hedge against global risk," said Australia & New Zealand Bank senior commodities analyst Mark Pervan.

When the U.S. currency falls, the price of gold, like that of oil, tends to rise as investors with dollars buy it to lock in value and non-dollar investors find it cheaper.

Investors also bought bonds. Short-dated euro zone government bond yields were at their lowest in over two years and implied rates down.

The two-year cash yield fell 11 basis points to 2.963 percent, its lowest since early 2006.

(Additional reporting by Rafael Nam, Toni Vorobyova and Kirsten Donovan, editing by Mike Peacock)