Oil resurges on Middle East woes; stocks slide, gold hits new high [Updated]
Escalating unrest in the Middle East drove oil prices up and stocks down Tuesday, and sent some investors fleeing for classic havens, including precious metals and Treasury bonds.
Gold hit a record high, topping its previous peak reached at the start of the year.
Near-term oil futures in New York ended floor trading at $99.63 a barrel, up $2.66, or 2.7%, from Monday and the highest close since September 2008.
Crude had briefly reached a high of $103.41 during trading last Thursday before pulling back.
Oil’s price in London also jumped Tuesday, gaining $3.68 to $115.48 a barrel.
The market had stabilized on Friday and Monday, helped by Saudia Arabia's promises to make up for cutbacks in Libyan oil output. But the headlines from the Middle East on Tuesday were uniformly frightening for markets. Libyan strongman Moammar Kadafi showed no signs of capitulating to Western demands that he step down, protests raged in Yemen and new anti-government demonstrations were reported in Iran.
Federal Reserve Chairman Ben S. Bernanke, testifying on Capitol Hill, sought to downplay the potential effects of rising crude costs on U.S. inflation.
But the resumption of oil's climb triggered selling by nervous investors on Wall Street, overshadowing a a report showing that U.S. manufacturing activity remained robust in February, a good sign for the economy. The Dow Jones industrial average was down 142 points, or 1.2%, to 12,084 at about noon PST, with an hour of trading to go.
[Updated at 1:10 p.m. PST: The Dow closed down 168.32 points, or 1.4%, to 12,058.02, its biggest one-day drop since it tumbled 178 points on Feb. 22, at the outset of the latest run-up in oil. Among broader indexes, the Standard & Poor's 500 and the Nasdaq composite both fell 1.6%.]
Some investors snapped up Treasury securities, pushing yields down. The five-year T-note yield slipped to 2.12% from 2.14% on Monday.
But the day’s big winners were precious metals. March gold futures soared $21.40 to $1,430.70 an ounce, topping the previous closing record of $1,422.60 reached Jan. 3.
Silver surged 61 cents to $34.42 an ounce, a new 31-year high (unadjusted for inflation).
Gold has risen in 10 of the last 11 trading sessions as social unrest in the Middle East and North Africa has spread.
“Gold has been the primary beneficiary of the flight-to-safety trade,” said Matt Zeman, a metals trader at LaSalle Futures Group in Chicago.
With the price at a new high, Zeman said it was likely that more investors would take notice, which could bring a new wave of buying on Wednesday, he said.
-- Tom Petruno
Photo: Anti-government protesters in Yemen on Tuesday. Credit: Khaled Abdullah / Reuters