By Jon A Nones

Gold futures plunged $59 to finish at $945.30 an ounce, the biggest single session loss since June 2006, after hitting a record high of $1,034 an ounce Monday. Spot gold was last down $44 at $937.30 bid. The yellow metal was hit by heavy liquidation of funds when the dollar regained some strength in light of yesterday s smaller than expected U.S. Federal Reserve rate cut.

Supports at $985, $975, $960 all gave way, and their failure raises the possibility of revisiting the $915 area where the latest ascending phase had begun back in mid January, said Jon Nadler, senior analyst at Kitco Bullion Dealers. Should that level not be maintained, there is very little in the way in terms of real brick and mortar until the mid $800's.

On Tuesday, the Federal Reserve cut the federal funds rate, the interest that banks charge each other on overnight loans, by three quarters of a percentage point down to 2.25%. However, Wall Street had expected a full percentage point. The Fed has been rapidly lowering rates down from 4.25% at the beginning of this year, drawing in speculative fund money.

The U.S. dollar was last up 0.157 at 72.088 on the index. Against the euro, the dollar traded at $1.5598 from $1.5625 yesterday, but actually declined to 99.30 yen from 99.85 on Tuesday.

In stock markets, the Dow fell 293.00 to 12,099.66, the Standard Poor's 500 index fell 32.32 to 1,298.42 and the Nasdaq composite index fell 58.30 to 2,209.96.

RI posted a link to a commentary on Tuesday by Mike Paulenoff, author of the, entitled, Gold to Sell off to $940 on US Interest Rate Cut Decision. Paulenoff used streetTRACKS Gold Shares [NYSE:GLD] as an example to show that gold peaked and the news about the interest rate reduction on Tuesday would be sold hard. He said that gold would traverse back towards $940.00 and was right.

With gold already up by more than 19% so far this year, consolidation is healthy and to be expected, said Mark O'Byrne, executive director of Gold Silver Investments Ltd.

In other metals, copper for May delivery lost 11 cents to $3.63 a pound, June palladium slid $25.2 to $489.65 an ounce, April platinum lost $81 to $1,887 an ounce and May silver ended lower by $1.51 to $18.45 an ounce. Crude oil futures lost $4.94 to end at $104.48 a barrel.