Gold Soars, Dollar Dips and Oil Slides in Post-election Turmoil

The post-election honeymoon for the US dollar proved short-lived yesterday as mounting fears over America's widening trade deficit sent the greenback to within a whisker of its all-time low against the euro.

In a move that will cut the cost of US exports to the rest of the world and makes imports into the world's biggest economy dearer, the dollar moved to within a third of a cent of the $1.2927 level against the single currency.

Concerted selling on foreign exchanges pushed the dollar to an eight-year low against the Swiss franc and its lowest level for nine years against a basket of world currencies.

Oil prices abruptly ended a post-election rally, with US light crude down $2.06 at $48.82 a barrel, the first close under $49 since late September and nearly $7 below record highs hit last week. London Brent was down $1.56 at $46.01.

With foreign exchange dealers predicting the dollar could fall far further to close America's $50bn a month trade gap, demand among investors for a safe refuge for their cash put $5 on the price of an ounce of gold. Bullion prices moved above $430 an ounce to their highest level in 16 years.

"If there is pressure on the dollar to go down and oil to go up, then gold will rise," Ross Norman of TheBullionDesk.com said.

Sterling was the one leading currency not to rise against the dollar, with the pound weighed down by concerns about falling house prices. The decision by the Bank of England to leave interest rates unchanged also weighed on sentiment, and sterling ended the day down a third of a cent at just over $1.84, and at its lowest level against the euro in 10 months.

The European Central Bank left borrowing costs in the eurozone unchanged at 2%, but its president, Jean-Claude Trichet, expressed concerns about the impact of rising oil prices on inflation.

Against the dollar, the euro reached $1.2896, with dealers anticipating it breaking through the $1.30 level over the coming days. "We [have] ... dangerous levels in the euro," said John Beerling, regional foreign exchange trading desk manager with Wells Fargo in Minneapolis.

Forex traders shrugged off a report that US jobless claims dipped by more than expected last week to 332,000, hinting the labour market was more robust than expected.