Stocks fell on Monday in a late-day selloff that took the Dow Jones Industrial Average below its lows of the May 6 “flash crash.”
The Dow ended down 115.48 points, or 1.2%, at a seven-month low of 9816.49 and below 9869.62, its low-point of the May 6 slide. That day, buyers rushed into the market at that level, helping pare a 1,000-point drop to a decline of 347.80 points.
But on Monday, no such buying appeared. The Nasdaq Composite fell 2%. The Standard & Poor’s 500-stock index slid 1.4%.
“Global tensions are at a pinnacle,” said Mike Daly, gold specialist at PFGBest in Chicago. That has prompted investors to move money into “tangible, safer assets.”‘
As part of that move, gold soared, ending with its biggest one-day gain in almost four months. Gold also began the day quietly. But at around 10 a.m., a sudden wave of buying drove the metal up by 2% within an hour, pushing it toward record Comex highs reached in mid-May.
Gold has been used by many investors as a refuge for everything from the slumping euro to inflation fears. On Monday, traders speculated that an investor trying to hedge against losses in euros may have placed a big bet that shot the metal higher.
Gold for June delivery rose $23.10 an ounce, or 1.9%, to $1,239.30. In euro terms, gold was trading up 4.1% to about €1,040 an ounce, a new record, in late New York electronic trading.
“Gold is not only benefiting from the euro weakness, but also a broad loss of appetite for risk,” Bart Melek, global commodity strategist at BMO Capital Markets.
The euro remained under pressure, though rebounded from its new four-year low of $1.1876 hit in Asian trading. In late trading in New York the euro was fetching $1.1917.
Traders and analysts said that while investors seemed initially calm Monday – and even cheered by healthy German manufacturing data – the inevitable Monday worries about Europe’s debt problems and the strength of the global economy soon set in.
Friday’s weak jobs report fueled worries that the U.S. economy may also be faltering.
“People are realizing that investing for a more modest economic recovery makes sense,” said Michael Farr, president of the portfolio-management firm Farr, Miller & Washington. “But that has to be done with great care.”
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