By V. Phani Kumar, MarketWatch HONG KONG (MarketWatch) — Gold prices shot cleanly through 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 delivery in December GC1Z +3.75% spiked $54.10, or 3.3%, to $1,705.90 an ounce in electronic trading during Asian hours on Monday, more than recovering the losses it made in a regular session on Friday. Spot gold also climbed $41.70, or 2.5%, to $1,705.10. Gold futures went 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 strategy note to clients. 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 DXY -0.39% , which measures the greenback against a basket of six other major currencies, eased to 74.199 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. Read Asia Markets. Varahabhotla Phani Kumar is a reporter in MarketWatch's Hong Kong bureau.

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