Despite the US Senate coming to an agreement yesterday on raising the debt ceiling and confirmation from credit agencies that the US will not lose its triple-A rating for the time being, stock markets around the globe fell yesterday and investors sought the security of gold.

The precious metal, seen as a sanctuary for investors in times of economic uncertainty, hit another high, peaking at $1,670 an ounce. In addition to concerns about the US economy, investors are worried that eurozone difficulties could intensify further.

The FTSE All-World equity index fell 0.6 per cent yesterday and sovereign bond yields have in many cases reached record lows. The FTSE Asia Pacific index lost 2.2 per cent, following the lead on Wall Street. Other stock markets and indices around the globe fell and this is the sixth consecutive day that global stocks have fallen. The effect of the US agreement on the debt ceiling appears to be minimal on stocks performance.

However, other US economic indicators such as economic growth and manufacturing performance have been negative and investor focus on these areas has not brought any economic confidence. Figures released on Tuesday revealed that consumer spending in the US fell by 0.2 per cent in June, the first fall for nearly two years.

Meanwhile, in Europe, service sector growth fell to its lowest level in two years and this, added to the effect on investor confidence from fears over the spread of eurozone contagion to Spain and Italy, the markets are jittery. Sovereign bond yields for Spain and Italy have risen to record levels and this conflicts with the two countries’s funding requirements.

Global economic concerns and the lack of safety in sovereign debt have encouraged investors to put their funds into safe havens such as gold.

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