Gold soars, markets slump on growth worries

Gold reached a new high Tuesdayand North American stock markets sold off amidfresh worries about U.S. economic weakness.

Gold for December delivery roseas high as $1,647.80 US an ounce, andclosedat $1,644.50, up $22.80, or 1.4 per cent.

Shares of Canadian gold miners surged accordingly, with the S&P/TSX Global Gold Index rising 2.9 per cent.

But the broader benchmark S&P/TSX composite index finisheddown193.31 points, or 1.49 per cent,to 12,752.32 its sixth straight losing session.

In New York, the Dow Jones industrial average fell 265.87 points, or 2.19 per cent, to 11,866.62. The Nasdaq composite index fell 75.37 points, or 2.75 per cent, to 2,669.24, while the S&P 500 index was down 32.89 points, or 2.56 per cent, at 1,254.05.

The Dow has fallen for eight consecutive sessions and the S&Pfor seven.The S&P 500 index is now at its lowest point of the year.

Gold prices have risen 15 per cent in 2011 and have gained for 11 straight years.

Investors have sought the metal as a safe haven amid concerns about slowing growth in the U.S. and China and whether a slowdown in Europe will result in the spread of that region's debt crisis from Greece, Ireland and Portugal to Spain and Italy.

The Canadian dollar declined 0.52 of a cent, to 104.14 cents US.

September oil on the New York Mercantile Exchange closed down $1.10,to $93.79 US a barrel.

Weakness might not be temporary

Worries about U.S. growth were compounded Tuesday by evidence that consumer spending fell in June and on Monday by data from the Institute for Supply Management. The ISM's index of activity in the manufacturing sector fell to 50.9 during July from 55.3 the previous month.

That raised concerns that the economic weakness seen in the first half of the year was not just temporary.

"It might be a bit bigger than a soft patch," said Chris Kuflik, wealth adviser at ScotiaMcLeod in Montreal.

"The talk around the world has been centred around debt crisis. And what it's done is [lead] to some paralysis as far as people who are willing and able to invest money in businesses. They're hunkering down because of all the uncertainty."

Both sets of dataare particularly bad news coming before the release Friday of the U.S. non-farm payrolls report. Job creation hopes for July were already muted.

A report on Sunday, meanwhile, said manufacturing in China, the fastest-growing economy in the world and best hope for global recovery, slowed.

HSBC's purchasing managers' index for China fell to its lowest level in 16 months.