Gold falls sharply as dollar recovers, oil drops from record

Other commodities traded mostly lower, with crude oil retreating from a record near $120 and copper, corn and wheat also falling.

The dollar rebounded slightly against the euro Wednesday, a day after weakening to as much as $1.6018 its lowest ever versus the 15-nation currency. The record drop touched off a broad commodities rally Tuesday as investors snatched up hard assets including gold, energy futures and grains as a hedge against inflation.

But the dollar's rebound Wednesday sparked a futures sell-off, sending gold futures briefly below $900 for the first time since April 3.

Gold for June delivery fell $17 to $908.20 an ounce on the New York Mercantile Exchange, after earlier dropping as low as $899.20. Gold has gained almost 9 percent this year but is more than $100 below its all-time record of $1,038.60, reached March 17.

Analysts blame the decline on falling demand for jewelry and a sense among investors that the worst of the credit crisis may be over, which would lessen gold's appeal as a safe-haven asset.

"We have turned more negative on the near-term outlook for gold," John Reade, analyst with UBS in London, said in a report. "We are still looking for a tactical opportunity to get long (on) gold but will only do so when long liquidation is complete and jewelry demand has recovered further."

Other precious metals also traded lower Wednesday. Silver for May delivery dropped 47.5 cents to $17.235 an ounce on the Nymex, while May copper fell 6.15 cents to $3.9040 a pound.

In energy futures, crude oil fluctuated after the U.S. Energy Department's Energy Information Administration said crude stockpiles increased more than expected last week, reducing concerns about tight supplies.

Light, sweet crude for June delivery fell 17 cents to $117.90 a barrel on the Nymex. Crude surged to a trading record of $119.90 on Tuesday, driven up as investors raced to settle positions before the May contract expired.

Other energy futures traded mixed. May gasoline futures rose 1.76 cents to $3.034 a gallon on the Nymex, while May heating oil lost about a penny to $3.3073 a gallon.

In agriculture markets, wheat prices plummeted to a five-month low on expectations that world wheat supplies will be adequate to meet demand.

Wheat for May delivery dropped 35.75 cents to $8.16 a bushel on the Chicago Board of Trade, its lowest level since November.

Other agriculture futures traded mixed. Soybeans for May delivery gained 9.25 cents to $13.84 a bushel on the CBOT, while May corn futures lost 3.75 cents to $5.905 a bushel.