TORONTO - The Toronto stock market closed lower but gold stocks helped check losses as the precious metal moved further into record territory as traders sought safe havens amid worries about government debt.

The S&P/TSX composite index was 45.4 points lower to 13,254.14 with most sectors in the red while the TSX Venture Exchange slipped 2.88 points to 2,004.5.

The U.S. dollar was also attractive for investors looking for a safety and the Canadian dollar lost 0.5 of a cent to 104.29 cents US.

The negative tone on markets follows the release of stress tests conducted on European banks.

On Friday, the European Banking Authority said only eight of the 90 EU banks it assessed failed.

But the prevailing view in the markets is that the tests didn't give a true picture of the banks' health since they didn't model what would happen if a eurozone country defaulted on its debt. Analysts thought that was particularly surprising given concerns that Greece may be forced to do exactly that.

Meanwhile, the yields, or interest rates, on Italian and Spanish bonds rose again Monday. That means investors are asking for higher and higher premiums to lend them money -- a sign they consider the countries an increasingly bad risk.

At the same time, there was growing unease over the failure of American lawmakers to agree on conditions for raising the U.S. debt limit by an Aug. 2 deadline. Otherwise, the government risks defaulting on its debt.

Rating agencies warned last week that the impasse puts the country's top AAA credit rating grade at risk but "I'm not that bent out of shape about the U.S.; it can fix its problems if it chooses to," said Chris King, portfolio manager at Morgan, Meighen and Associates.

"Europe is a much more difficult scenario. You have personalities, you have national cultures and you have varying willingness to address problems and as a result, that is a much more unpredictable and a situation we should feel more pessimistic about."

The August gold contract in New York was ahead $12.30 to a fresh record closing high of US$1,602.40 an ounce. The gold sector was the strongest gainer as Goldcorp Inc. (TSX:G) ran ahead $1.20 to C$52.79 while Barrick Gold (TSX:ABX) climbed 92 cents to C$47.03.

Carpathian Gold Inc. (TSX:CPN) said Barrick Gold will take a nine per cent stake, or 38.5 million shares in the gold development company for $20 million. Its shares edged up a penny to 59 cents.

Financials led decliners, down 1.42 per cent with Scotiabank (TSX:BNS) down $1.03 to $56 and Royal Bank (TSX:RY) fell 60 cents to $52.45. Manulife Financial Corp. (TSX:MFC) shares were 42 cents lower to $15.57 after the insurer announced it is selling its Life Retrocession reinsurance business to Pacific Life Insurance Co. for an after-tax gain of $275 million.

The higher American currency punished oil prices with the August contract on the Nymex down $1.31 to US$95.93 a barrel.

A stronger greenback usually helps depress oil prices, which are denominated in dollars, as it makes oil more expensive for holders of other currencies.

The energy sector backed off 0.33 per cent as Canadian Natural Resources (TSX:CNQ) fell 28 cents to C$39.49 and Suncor Energy (TSX:SU) shed 46 cents to $37.55.

Elsewhere in the energy sector, Shell Canada Energy said Friday it is selling its stake in the long-stalled Mackenzie pipeline project in the Northwest Territories, along with other assets in the region. If built, the Mackenzie pipeline would connect natural gas from near the coast of the Beaufort Sea in the Northwest Territories to northwestern Alberta, where it would link up with TransCanada Corp.'s (TSX:TRP) vast network. Imperial Oil Ltd. (TSX:IMO) is the lead partner on the project and its shares were down 25 cents to C$43.98.

The base metals sector declined 1.17 per cent as copper prices shed one cent at $4.40 a pound. First Quantum (TSX:FM) dropped $3 to C$132 and Teck Resources (TSX:TCK.B) fell 87 cents to $49.03.

Industrial stocks also dragged with Bombardier Inc. (TSX:BBD.B) down 22 cents to $6.16 while Canadian National Railways (TSX:CNR) fell 75 cents to $73.60.

New York's Dow industrials fell 94.57 points to 12,385.16.

The Nasdaq composite index was down 24.69 points to 2,765.11 while the S&P 500 index gave back 10.7 points to 1,305.44.

Shares of News Corp. continued to decline Monday as the ongoing fallout from the British phone hacking scandal continued to weigh on the media conglomerate led by Rupert Murdoch. The shares closed down 68 cents or 4.3 per cent to US$14.97. Before Monday, it had lost 13 per cent since July 4, when the Guardian newspaper reported that employees at the now-closed tabloid News of the World had intercepted the voice mail of a schoolgirl who was later found murdered.

On the earnings front, IBM reported quarterly profit of US$3.09 per share after the market close, which was higher than the US$3.03 that analysts had expected. Revenue came in at US$26.67, which also beat expectations. However, its shares slipped about 0.7 per cent in after hours trading in New York.

Profits at convenience store giant Alimentation Couche-Tard (TSX:ATD.B) increased by 22 per cent to US$370.1 million or US$1.97 per share, up from $302.9 million or $1.60 per share in 2010. Aided by higher fuel prices, revenues increased to nearly US$19 billion from US$16.4 billion in 2010. Analysts had expected Couche-Tard to earn US$1.94 per share on US$18.6 billion of revenues for the year and its shares slipped five cents to $29.43.

Hasbro said strong demand for its toys like Transformers action figures and its Beyblade spin-top game helped its second-quarter profit jump 33 per cent to US$58.1 million or 42 cents a share, or 33 cents excluding one-time items. That was six cents below estimates and its shares slipped $1.97 to US$39.40.

Oil services company Halliburton Co. says the expansion of oil and natural gas drilling in North America helped boosted company earnings by nearly 54 per cent in the second quarter to US$739 million or 80 cents a share. That was seven cents above expectations and its shares added four cents to US$53.12.