As investors dumped shares worldwide they have been using the money raised to buy gold the price of which is hitting fresh record levels.
In the last three days gold was up by more than seven percent on fears the global economy will shrink due to the debt crises in the euro zone and the US.
Institutional investors – like pension funds – are rushing to buy the precious metal to make up the losses from their plummeting share holdings.
At the New York Mercantile Exchange, gold trader Paul Sacks with Aurum Options Strategies said this looks like a long term trend: “In the short term, yeah this is a huge rally, technically speaking, maybe it’s overbought, maybe it’s not. The long-term picture, in spite of a debt ceiling agreement, in spite of an S&P downgrade, it’s very, very bullish long-term for gold.”
Oil prices – by contrast – slid early on, and ended the London session slightly ahead, though there was seesaw trading.
On Tuesday afternoon Brent crude slumped to its lowest level in six months.
Brent, which is the European benchmark, was at one stage below the psychologically important $100 a barrel level.
The equivalent benchmark in the US slipped as low as $75 a barrel on concerns that a slowing world economy would hit demand for energy.