Commodities turn lower for 2nd day on crude drop

Crude dropped about $4 a barrel, bring total losses from the last seven trading days to more than $20 a barrel, or 14 percent. The steep decline has weighed on other commodities and raised questions about whether the bull-run in futures markets may be slowing down as a global economic slowdown cuts into demand for energy and raw materials.

Precious metals posted some of the day's most dramatic falls, with gold losing more than $25 an ounce on expectations that the Federal Reserve might hike interest rates and boost the dollar, diminishing the appeal for hard assets as inflation hedges.

Gold for August delivery shed $27.50 to settle at $922.80 an ounce on the New York Mercantile Exchange, after earlier dropping to $917.50. Gold has fallen about $70, or 7 percent, since surging near $990 an ounce last week on concerns that beleaguered mortgage giants Fannie Mae and Freddie Mac might go into default.

Other metals also fell Wednesday. September silver futures lost 54.7 cents to settle at $17.458 an ounce on the Nymex, while September copper dropped 3.3 cents to settle at $3.6575 a pound.

Gold prices sold off Tuesday after Federal Reserve Bank of Philadelphia President Charles Plosser said the central bank will need to boost interest rates "sooner rather than later" to fend off inflation, helping send the dollar sharply higher against the euro.

"The dollar's ... sails are inflating just about as fast as those of oil and gold are deflating," Jon Nadler, analyst with Kitco Bullion Dealers Montreal, said in a note.

In energy markets, crude oil fell below $125 for the first time since early June on expectations that high prices and a slowing economy are curbing demand. The Energy Department's Energy Information Administration said in its weekly report that demand for gasoline over the four weeks ended July 18 was 2.4 percent lower than a year earlier, averaging more than 9.3 million barrels a day.

Light, sweet crude for September delivery dropped $3.98 to settle at $124.44 a barrel on the Nymex, crude's lowest finish since June 4.

Other energy futures also traded lower. August heating oil futures lost 12.8 cents to settle at $3.5501 a gallon, while gasoline futures shed 11.26 cents to settle at $3.0344 a gallon.