Gold falls to 4-month low on stronger dollar; Oil retreats

Other commodities traded broadly lower for a second straight session, with crude oil, copper, silver and most agriculture future falling sharply.

The dollar gained against the euro for a second day after a report showed a surprise drop in the number of Americans seeking jobless claims. Claims for unemployment benefits fell by 33,000 last week to 342,000, the Labor Department said. That contrasted with expectations from economists, who had predicted claims would rise by 3,000.

The euro bought $1.5664, down from the $1.5896 it bought late Wednesday. On Tuesday, the dollar fell to a record low $1.6018 against the 15-nation currency.

Gold futures reacted sharply, with the June contract dropping $20.30 to $888.70 an ounce on the New York Mercantile Exchange, after earlier falling as low as $884.50, its lowest level since Jan. 10. Gold has fallen 8 percent since March and is nearly $150 off its all-time high of $1,038.60.

Gold investors "have decided that there are changes in the atmosphere, with the No. 1 being the improvement in the dollar," said George Gero, vice president at RBC Capital Markets Global Futures in New York. "I don't think it's the beginning of the end (for gold) but it's certainly making people think twice about holding long positions."

A rising dollar generally encourages investors to shift funds out of safe-haven assets like gold, and a stronger greenback makes dollar-denominated commodities more expensive to overseas buyers.

Also boosting the dollar and pressuring gold is the belief among analysts that the Federal Reserve may soon wind down its interest rate cutting campaign and turn its attention to fighting inflation. That would diminish the appeal of gold and other hard assets as inflation hedges.

Other precious metals also fell sharply Thursday. Silver for May delivery sank 48.5 cents to $16.68 an ounce on the Nymex, while May copper lost $3.6 cents to $3.868 a pound.

In energy futures, oil futures dropped more than $3 on the rebounding dollar, allowing investors to cash in profits from crude's recent run-up to near $120.