Gold shot to record highs of nearly $1,500 an ounce Monday and most other commodities fell as investors turned to safe-haven assets after Standard & Poor's threatened to cut the United States' AAA credit rating.
The credit rating agency cited a risk that policymakers may not reach agreement on a plan to slash America's huge federal budget deficit, saying authorities have not made clear how they will tackle long-term fiscal pressures.
"It's a wake-up call that we need to do something in the U.S.," Axel Merk, portfolio manager at Merk Hard Currency Fund in Palo Alto, Calif., said after S&P downgraded its credit outlook for the United States.
"The challenge is that the U.S. has relied for too long on its reserve status and not engaged in the reform that got us to be the reserve currency in the first place," Merk said.
The U.S. dollar rose 1.4 per cent against the euro but some currency strategists saw that as a knee-jerk reaction to broad risk aversion, saying the greenback would likely drop back on a hit to sentiment toward the United States.
The Reuters-Jefferies CRB index, a global benchmark for commodities, settled down 1 per cent and most of its 19 components ended in negative territory.
Aside from gold - the traditional safe-haven - the CRB's gainers were grains such as wheat and corn, which benefited from dry weather threatening such crops.
U.S. crude settled down $2.54, or 2.3 per cent, at $107.12 a barrel, after falling more than $3 at one point to a session low of $106.59. London's Brent crude finished down $1.84 at $121.61 a barrel.
Remarks by OPEC ministers that high oil prices could place a major strain on consumers also weighed on the market.
"The market has been focused on demand destruction over the past week ... and this should go some way to cementing that view," said Paul Harris, head of natural resources risk management at Bank of Ireland in Dublin.
Copper fell almost 1.5 per cent, hitting one-month lows and settling down a sixth straight day. The metal, one of the most economically sensitive commodities and critical to power generation, ended down 5.95 cents at $4.1980 a lb in New York.
In London, it closed down $135 at $9,270 a tonne.
Fresh tightening by China, which raised for a fourth time this year the reserve requirement for its banks, also sparked risk aversion in commodities and other capital markets.
Spot gold, which tracks trades in bullion, rose to an all-time high of $1,497.20 an ounce. Benchmark gold futures in New York ended up $6.90, or half a per cent, at $1,492.90 an ounce after hitting a record at $1,498.60.
Wheat led grains markets higher as dry weather continued to stress the hard red winter wheat crop in the southern U.S. Plains. A lack of rain in France, the European Union's top grain producer, also raised concerns over the yield potential for European wheat.