Gold and government bond prices rose while US stocks fell yesterday as news of the assassination of Pakistani opposition leader Benazir Bhutto, combined with mostly weak US economic data, increased investor demand for safe-haven assets.
Some analysts said the shock of Bhutto's death triggered a classic flight of capital to assets deemed as safe havens in times of geopolitical stress. Bhutto's death at a rally in Rawalpindi could spark regional instability and civil unrest within Pakistan.
Gold rallied to a one-month high, up $6.35, or about 0.7 per cent, at $830.65 an ounce. The benchmark 10-year US Treasury note shot up in price. Euro-zone government bond prices also rose after the Bhutto news and a stream of US data, paring earlier losses to standing slightly down on the day. US crude oil futures soared above $97 a barrel after the latest government inventory data showed a steep drop in crude stockpiles, while stocks sold off sharply and the dollar sank against the euro.
New orders for US durable goods, which are long-lasting US-made manufactured goods such as cars, refrigerators and washing machines, rose by a much less-than-expected 0.1 per cent during November.
In contrast, an index of US consumer confidence unexpectedly rose in December, and as a result, US Treasury bonds pared some gains from the morning's highs.
The dollar tumbled against the euro, marking its fifth straight day of decline. Traders said holiday-thinned trade was exaggerating the moves after Bhutto's assassination and the weak US economic reports.
The euro rose to a session high of about $1.4605, up 0.8 per cent from $1.4492 late on Wednesday. This was the euro's highest level in nearly two weeks. It was on track for its fifth straight day of gains versus the greenback. The euro also hit a record high at 73.35 pence.
