* World stocks hit by losses again
* Wall Street extends losses, down 3.0 percent
* Italian, Spanish bond yields drop on ECB buying
* Gold hits record above $1,700 an ounce (Updates prices, adds details, quote)
By Leah Schnurr
NEW YORK, Aug 8 (Reuters) - World stocks slid to their lowest level in nearly a year on Monday, overshadowing relief that the European Central Bank was buying Italian and Spanish government bonds in the latest move to staunch the euro zone debt crisis.
U.S. stocks extended losses in early trading, falling more than 3.0 percent on the heels of its worst week in more than two years. MSCI's all-country world stock index <.MIWD00000PUS> dropped 3.8 percent. The index was at its lowest level since September 2010.
Despite Standard & Poor's downgrading the U.S. government's long-term credit rating on Friday night, safe-haven U.S. Treasury debt was higher in price. The 30-year U.S. Treasury bond
Investors continued to seek safe haven in gold, which vaulted above $1,700 an ounce for the first time after respective pledges by the G7 and the European Central Bank failed to quell turbulence in the financial markets and did nothing to put investors at ease.
"What's concerning us and holding us back from buying what we think is value is that the ferocity of the momentum of the downside is still quite strong," said Paul Zemsky, head of asset allocation at ING in New York.
After an hour of trading, the Dow Jones industrial average <.DJI> dropped 368.28 points, or 3.22 percent, at 11,076.33. The Standard & Poor's 500 Index <.SPX> was down 45.55 points, or 3.80 percent, at 1,153.83. The Nasdaq Composite Index <.IXIC> was down 105.68 points, or 4.17 percent, at 2,426.73.
ECB BOND BUYING
Even the European Central Bank's dramatic intervention in bond markets, which pushed down yields on Spanish and Italian bonds, was not enough to stem selling in stocks. For details, see [nLDE7770NM]
European shares <.FTEU3> were down 3.3 percent after earlier registering gains on the ECB action, intended to take the heat out of the spreading euro zone debt crisis. The FTSEurofirst 300 index is nearing bear market territory, characterized by a drop of 20 percent from the peak.
"The markets don't believe that the situation in Europe is under control," a trader said. "This market is very difficult to make money. In fact, this past two weeks have been the hardest in 10 years."
The euro fell against the U.S. dollar after gaining initially on the ECB action.
Investors were seemingly unimpressed by weekend talks among industrialized countries aimed at safeguarding the smooth functioning of financial markets following S&P's downgrade of the U.S. government long-term rating to AA-plus from AAA. [ID:nL3E7J80LZ]
"It won't be long now before other ratings agencies follow suit, considering the state of the U.S.' finances. One thing is for certain, and that's that volatility will continue to remain high, making trading conditions difficult," said Angus Campbell, head of sales at Capital Spreads.
Moody's repeated a warning on Monday that it could downgrade the United States before 2013 if the fiscal or economic outlook weakened significantly. But it said it saw the potential for a new deal in Washington to cut the budget deficit before then. [ID:nN1E77700L] (Additional reporting by Edward Krudy in New York, Blaise Robinson in Paris; Editing by Dan Grebler)