As Europe's debt crisis deepens, low-yielding US government debt and the much maligned dollar are suddenly glowing more brightly than gold. After surging to a record high above $1,900 an ounce this month, gold has shed about 8 percent over the past two weeks, with about a quarter of that decline coming on Monday. Instead, investors snapped up long-dated Treasuries, and poured into the dollar even though the Federal Reserve has all put promised to keep short-term interest rates near zero until at least mid-2013. "It's a very unsettled world out there," said Wan-Chong Kung, senior portfolio manager at Nuveen Asset Management in Minneapolis, an affiliate of Nuveen Investments, which oversees $210 billion in assets. "There are precious few true safe havens in the minds of investors." Over the last few months, gold had been viewed as one of the most solid of safe havens, particularly at a time when developed countries saddled with slow growth and high debt have been trying to inject life into their economies and export sectors with weaker currencies. For some, worries that massive monetary and fiscal stimulus would eventually stoke inflation also pushed gold higher. But fear that a Greek default would push other indebted euro zone countries further into distress and spark losses across the European banking system has investors falling back on the depth and safety of the dollar. "People are moving straight to cash instead of looking at alternative safe assets like gold," said David Meger, metals trading director at Chicago's Vision Financial Markets. Money managers summed up their own cautious views. "I've pulled in my horns a bit, staying fairly close to neutral," said Gregory Whiteley, who manages a government bond portfolio for Los Angeles-based DoubleLine Capital, with USD 16 billion in assets. "The thing in the back of my mind is this situation in Europe." Dan Fuss, vice chairman of Loomis Sayles, which oversees over USD 160 billion in assets, told Reuters the firm began increasing its US dollar-asset exposure during the summer as unease about Europe and the US economy started to grow. Loomis' dollar exposure has climbed from 60-70% while non-dollar exposure dropped from 40-30%, Fuss said. "We increased our exposure in US dollar-assets also because the world got a little bit scarier," he said. "These are short-term tactical moves. That said, the US is still far and away the best credit in the world." John Taylor, chief executive officer of the USD 8 billion currency hedge fund FX Concepts, said on Monday he was still long US dollars. Taylor, who predicted late last year that the United States could enter another recession in 2011, also said he continues to be bearish on US stocks.

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