Gold futures dropped sharply on Thursday, sliding further after their worst one-day drop in nearly two years, as a broad sell-off in commodities such as crude oil continued, spurred by dollar strength and further interest rate cuts.

Interest-rate futures show a 58 percent chance the Federal Reserve will cut borrowing costs by 50 basis points to 1.75 percent next month, compared with an 82 percent chance on Wednesday. The precious metal fell as much as 4 percent to a one-month low as investors cashed in to cover losses in other markets.

The Fed has cut the overnight lending rate six times since September, when it was initially 5.25 percent. Gold hit a new record of $1,033.90 an ounce on the New York Mercantile Exchange on March 17 before loosing nearly $100 this week. Gold futures for April delivery fell $24.40 to $945.80.

In currency trading, the dollar index, which tracks the value of the greenback against a basket of other major currencies, rallied more than 1 percent to 72.82.

Over the past two days, commodities have stumbled across the board with gold dropping 6 percent on Wednesday as investors cashed in which analysts said was caused by a smaller-than-expected U.S. rate cut by the Federal Reserve on Tuesday.

The psychology of the market has moved manifestly against gold, said Dennis Gartman, economist and editor of the Gartman Letter. The dollar is strong. The other commodities are weak. That is putting downward pressure on gold.

We are certain that sometime later this year, we shall see gold, and the grains and perhaps even the base metals trading materially higher than where they had traded earlier this week, Gartman added.