Gold dove over 3 per cent Wednesday as the dollar surged and crude oil prices sank, denting the precious metal's alternative investment appeal.Oil prices fell below $125 (U.S.) a barrel, soothing some of the inflation fears that have supported gold, while other commodities such as grains and base metals also slipped.HSBC analyst James Steel said a combination of weaker oil prices, declines in other commodities, an improvement in the credit market and the belief that the U.S. Federal Reserve may be focusing more on inflation are all conspiring to push gold lower.“Gold has four major things hitting it today so I would be very surprised, given the way other commodities and financial markets are moving, if gold wasn't down,” he said.U.S. goldfutures for August delivery settled down $25.70, or 2.7 per cent, at $922.80 an ounce on the Comex division of New York Mercantile Exchange. The low was $918.80, a two-week bottom. In after-hours electronic trade, the market slid to $917.80, a level 3.2 per cent below the Tuesday close of $948.50.Spot gold was at $919.90/921.50 by New York's last quote at 3:15 p.m. EDT (1915 GMT), down from $948.30/949.90 late in New York on Tuesday, having hit an intraday low of $917.75 – its lowest level since July 9.Crude prices tumbled, giving up more than $4 a barrel and dropping below $125 a barrel, as concerns eased that Hurricane Dolly would hit oil installations in the Gulf of Mexico, and after a rise in U.S. gasoline stocks., The dollar rallied to a two-week high against the euro, supported by a slide in the oil price and a recovery in risk appetite. A stronger greenback tends to pressure gold, which is often bought as an alternative investment to the currency. Gold usually moves in the same direction as crude, as it is often bought as a hedge against oil-led inflation.Investor interest in gold seemed to be softening, with the amount of gold held to back the SPDR Gold Trust in New York – the world's biggest gold-backed exchange-traded fund – falling 2 per cent to 690.26 tonnes on Tuesday.However, gold still has not broken below major support levels, and it still looked bullish in intermediate- to long-term charts, said LOGIC Advisors managing partner Bill O'Neill www.fashion-accouterment.com
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