Gold Price Update

HONG KONG (MarketWatch) — Gold prices soared above the $1,700-an-ounce barrier on Monday to set another record as the Standard & Poor’s downgrade of U.S. credit ratings amplified worries about global economic outlook, luring investors to the metal’s safe-haven appeal.

Gold futures for December delivery /quotes/zigman/661658 GC1Z +3.66%  spiked $54.10, or 3.3%, to $1,705.90 an ounce in electronic trading on Globex, more than recovering the losses it made in a regular session on Friday.

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S&P chief explains downgrade

Standard & Poors chief David Beers discusses the downgrade. Courtesy Fox News Sunday.

Gold futures rose as high as $1,718.20 an ounce during the session.

The latest rally came in the wake of S&P’s downgrade Friday of U.S. credit ratings to AA+ from AAA. A decline in the U.S. dollar and hefty losses in Asian stocks aided the surge.

“The downgrade will no doubt weigh further on the already very negative sentiment towards the [U.S. dollar] and accelerate the pace of reserve diversification from” the greenback, Bank of America Merrill Lynch analysts wrote in a note.

However, they also said the short-term impact on the U.S. dollar would depend on the performance of risk assets in reaction to the S&P decision.

“It is conceivable that if the recent sell-off of risky assets were to continue, the [dollar] may even strengthen,” they said.

Gold prices and the U.S. currency often — but not always — tend to move in opposite directions, as the metal’s dollar-denominated price is used as the international benchmark.

The U.S. dollar index /quotes/zigman/1652083 DXY -0.40% , which measures the greenback against a basket of six other major currencies, fell to 74.117 from 74.306 late in New York trading Friday. Read full story on currencies.

Asian stocks also got a black eye as investors dumped equities and pared exposure to risk assets. U.S. stock futures pointed to a sharply lower opening for Wall Street, with futures on the Dow Jones Industrial Average /quotes/zigman/1785993 DJ1U -1.68%  down 128 points. Read Asia Markets.