Gold prices kicked off the third quarter with a better than 2 percent jump Monday as growing pessimism over Europe's finances drove investors out of stocks, the euro and industrial commodities and into dollars and the yellow metal.
The euro approached an eight-month low, and the Standard & Poor's 500 stock index fell to its lowest level of the year. The price of the benchmark U.S. crude oil was down more than 2 percent to $77.27 per 42-gallon barrel, while copper fell on the Comex to its lowest level in a year.
In lieu of stocks, the euro and industrial commodities, investors piled into the dollar, which jumped nearly 1 percent, and U.S. Treasuries, whose prices soared: the interest rate on 10-year bonds -- which moves in the opposite direction of the price -- plunged to 1.79 percent.
The big driver behind the day's developments was Europe's sovereign debt crisis. On Sunday night, Greek officials admitted their draft 2012 budget would miss a deficit reduction target it had hoped to reach to qualify for more bailout money.
European financial leaders, meanwhile, met Monday on how to protect their banks from a widely expected Greek default. The European Central Bank bought Italian and Spanish bonds to help protect those economies from sliding into the same plight as Greece.
The big issue in the Eurozone remains avoiding contagion from the all-but-inevitable Greek sovereign default, Larry Hatheway, UBS' top macro strategist, said in a note.
Investors were also spooked by the dimming outlook for the broader Eurozone area.
The latest European business confidence data signal an intensifying industrial recession and stagnating service sector -- raising the risk of economy-wide recession, Suki Cooper of Barclays Capital said.
Gold for December delivery rose $35.40, or 2.2 percent, to $1,657.50, while gold for immediate delivery climbed $2 to $1,652.43.
Silver for December delivery was up 71 cents to $30.80, while silver for immediate delivery added 6 cents to $30.79.