Oil sinks, gold at record US$1,778

Equity markets dived on growing fears of a global recession after last week's cut in the United States's credit rating.

Stock markets in Asia plummeted and the Swiss franc held near a record high after investors fled riskier assets in a global sell-off ignited by fears that political leaders are unable to tackle debt crises in Europe and the United States.

As investors exited stocks for bonds and bullion, holdings of the SPDR Gold Trust registered their biggest one-day gain in more than a year on Monday, sending the price of gold to a premium over traditionally more expensive platinum.

U.S. gold futures for December struck a record around US$1,778 an ounce, while cash gold hit an all-time high about US$1,742 an ounce, its 12th record in 20 sessions.

Gold rallied more than 3 percent on Monday, exceeding $1,700 an ounce for the first time after Standard & Poor's cut the U.S. credit rating to AA-plus, setting off an investor stampede for safety.

The cost of insuring French debt against default rose on Monday after the downgrade raised questions over how long other countries could hold onto their top-notch ratings.

Silver ticked down below US$40 an ounce after Monday's gains. Platinum and sister metal palladium tracked equities lower because of their industrial use as auto catalysts and fears a global recession could slash automobile demand.

Investors await the Federal Open Market Committee meeting later today for clues to whether the Fed might ease monetary policy further.

Economists at top financial institutions have scaled back expectations for U.S. economic growth this year and offer a nearly one in three chance the Fed will embark on another round of Treasuries purchases in the next two years, a Reuters poll found.

JP Morgan said on Monday it expected spot gold to climb to US$2,500 an ounce or higher by year-end, on very high volatility, following the downgrade of U.S. debt. The U.S. bank said its previous estimate of US$1,800 was "too conservative."

The prospect of an even longer period of low U.S. interest rates prompted Goldman Sachs to raise its three-month forecast for the gold price by about US$100.

Meanwhile, Brent North Sea crude for September delivery slipped US$4.11, or 3.96 percent, to US$99.63, its lowest level since February 8, 2011.

New York's main contract, West Texas Intermediate (WTI) light sweet crude for delivery in September shed US$4.72, or 5.80 percent, to US$76.59 per barrel, a level it had not reached since September 29, 2010.

WTI prices had plunged US$5.60, or 6.89 percent, to a low of US$75.71 in intra-day trade before clawing back some ground.

Crude prices went into freefall after the unprecedented downgrade Friday of the US' long-term sovereign debt rating from AAA to AA+, Barclays Capital said in a report.

The downgrade also came on the heels of economic data from the US -- the world's largest crude consumer -- showing weak jobs creation and service sector growth numbers in July, which did nothing to reassure spooked traders, the report added.

"Crude oil prices fell sharply in the aftermath of the S&P downgrade, and we expect continued pressure on prices until the flurry of negative economic data subsides," it stated.