UPDATE 1-Gold hits all-time high as equities tumble on U.S. downgrade

Aug 9 (Reuters) - Bullion roared to all-time highs for the second consecutive session on Tuesday as stock markets plunged on growing fears of a recession in the United States after last week's cut in the country's credit rating. U.S. gold futures GCcv1 struck a record around $1,727 an ounce, while cash gold hit an all-time high about $1,724 an ounce as investors fled stocks for bonds and bullion following the historic U.S. downgrade. "Markets are now worried about another global recession. Out of Europe, French bond yields have widened an 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 surged more than 3 percent on Monday, surpassing $1,700 an ounce for the first time after Standard & Poor's cut the top-notch AAA credit rating of the United States, setting off an investor stampede for safety. Wall Street ended down more than 6 percent, with U.S. stocks racking up their biggest losses in almost three years while European stocks hit a two-year low as investors saw no solution to the twin debt crises on both sides of the Atlantic. The cost of insuring French debt against default rose on Monday after a Standard & Poor's downgrade of the United State's triple-A rating raised questions over how long other countries could hold onto their top-notch ratings. Adjusted for inflation, bullion is one of the few elements of the commodity complex trading below its all-time highs, estimated at $2,500 an ounce. J P 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. Holdings of the SPDR Gold Trust registered their biggest one-day gain in more than a year, rising 1.8 percent on Monday.