Bullion gained 1.7 percent on Tuesday, roaring to all-time highs for a second consecutive session as equity markets dived on growing fears of a global recession after last week's cut in the United States's credit rating.

Stock markets in Asia plummeted and the Swiss franc held near a record high after investors fled riskier assets in a global sell-off ignited by fears that political leaders are

unable to tackle debt crises in Europe and the United States.

As investors exited stocks for bonds and bullion, holdings of the SPDR Gold Trust registered their biggest one-day gain in more than a year on Monday, sending the price of gold to a premium over traditionally more expensive platinum.

U.S. gold futures for December struck a record around $1,746 an ounce, while cash gold hit an all-time high about $1,742 an ounce, its 12th record in 20 sessions.

"Markets are now worried about another global recession. Out of Europe, French bond yields have widened on expectation of sovereign debt downgrade because of the country's exposure to peripheral European debt," said Natalie Robertson, a commodities strategist at ANZ.

"I think everyone was also looking at the 7 percent drop in the S&P 500. The market was very concerned over the global economy. Gold is now more expensive than platinum, and the last time this happened was back in December 2008. That's an interesting dynamic.

Gold rallied more than 3 percent on Monday, exceeding $1,700 an ounce for the first time after Standard & Poor's cut the U.S. credit rating to AA-plus, setting off an investor stampede for safety.

The cost of insuring French debt against default rose on Monday after the downgrade raised questions over how long other countries could hold onto their top-notch ratings.

Silver ticked down below $40 an ounce after Monday's gains. Platinum and sister metal palladium tracked equities lower because of their industrial use as auto catalysts and fears a global recession could slash automobile demand.

Adjusted for inflation, gold is one of the few elements of the commodity complex trading below its all-time highs, estimated at $2,500 an ounce.

The CBOE Gold ETF Volatility Index, often referred to as the "Gold VIX" and based on SPDR Gold Trust options, jumped 30 percent to its highest since late 2010.

Investors await the Federal Open Market Committee meeting on Tuesday for clues to whether the Fed might ease monetary policy further.

"The market's near-term focus will be on further ratings downgrades to come," said Tom Pawlicki, precious metals and energy analyst at MF Global.

"The FOMC meeting is today, and any potential action to implement further easing will also offer support. In the background, support will come from central bank buying, investment inflows, and weakness in economic data."

Economists at top financial institutions have scaled back expectations for U.S. economic growth this year and offer a nearly one in three chance the Fed will embark on another round of Treasuries purchases in the next two years, a Reuters poll

found.

JP Morgan said on Monday it expected spot gold to climb to $2,500 an ounce or higher by year-end, on very high volatility, following the downgrade of U.S. debt. The U.S. bank said its previous estimate of $1,800 was "too conservative".

The prospect of an even longer period of low U.S. interest rates prompted Goldman Sachs to raise its three-month forecast for the gold price by about $100.

TOCOM prices in yen per gram. Spot prices in $ per ounce.

COMEX gold and silver contracts show the most active months.