Gold futures fall sharply, as oil drops, dollar gains

NEW YORK (MarketWatch) -- Gold futures extended their decline on Thursday, coming under pressure amid falling crude-oil prices and firmness in the U.S. dollar.

Gold for February delivery dropped $9.70 at $794 an ounce on the New York Mercantile Exchange. Other metals prices also traded lower.

On Wednesday, gold futures dropped $3.90 to finish at $803.70.

"With both oil and the dollar beginning to reverse their trends as year-end profit taking emerges, it looks as if gold will continue to see pockets of pressure," said James Moore, an analyst at TheBullionDesk.com, in research note.

"However, we don't expect gold to drop significantly lower as scaled down buying emerges from the physical sector, while the sensitivity in the credit/sub-prime issues continues to draw investment demand," he said.

The dollar index, which tracks the performance of the greenback against a basket of other major currencies, rose 0.4% at 76.710.

"The U.S. dollar is firm on improved technicals and improved U.S. fundamentals that have damped speculation of a 50 basis point Fed rate cut next week," said analysts at Brown Brothers Harriman in a research note.

Crude-oil futures fell 78 cents to $86.71 a barrel in electronic trading on the Nymex. On Wednesday, crude-oil futures erased earlier gains and closed lower after a government report showed U.S. crude inventories slumped 8 million barrels to the lowest in nearly three years, but heating oil and gasoline inventories increased unexpectedly.

Also on Nymex on Thursday, March silver fell 25.50 cents at $14.205 an ounce, January platinum dropped $7.30 at $1,461 an ounce and March palladium declined $4.45 to $350 an ounce.

December copper edged down 2 cents at $2.9960 a pound.

Gold warehouse inventories declined by 30,159 troy ounces to stand at 7.4 million troy ounces as of late Wednesday, according to Nymex data.
Silver stockpiles fell by 57,664 troy ounces to 134 million troy ounces and copper supplies edged down 225 short tons to 17,743 short tons.