Dollar tumbles, gold at record high

The dollar fell to a fresh low of $1.3799 against the euro following the surprise and unexpected 4.000 decline in US non-farm payrolls in August for the first time in four years, while gold traded above $700 per ounce, a new 16-month high.

Analysts had expected a gain of 108.000 in non-farm payrolls and were surprised at the steep decline in the all-important figure, which more than convinced all traders and analysts that the Fed policymakers meeting on September 18 will have no choice to cut the Fed funds rate by at least a quarter.

Gold traded as high $707.45 an ounce, closing in on a 26-year high of $730 hit in 2006.

Other analysts said with the subprime problems and the credit crunch now starting to hurt the economy, the Fed may have to consider a deeper cut, even 50-basis points.

With the Fed seen cutting rates while the Bank of England the European Central Bank seen maintaining rates at present levels, investors rushed into euros and sterling driving both currencies higher.

The euro hit a new session high of $1.3799 while sterling touched a new high of $2.0327.