Gold hung in at $900 until London opened, then declined modestly until about an hour into the New York session, after which it was hammered, falling as low as $873 before making a small comeback during the Globex to finish at $877.00/oz., down $22.90. Overnight, gold has been flat.

Platinum was off sharply in Europe, falling well below the $2000 mark, but clawed its way back in New York to almost retake the level, ending at $1999/oz., down $70. Overnight, platinum has edged lower.

Silver got whacked from London straight through the NYMEX, only leveling off in Globex trading into a close at $16.60/oz., down 81 cents. Overnight, silver has edged higher.
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It was a third straight down day for the precious metals, and it was a bad one as gold tumbled to a two-week low.

That it would be a down day was no shocker, considering that falling oil prices and a firming dollar aligned the stars against gold and its sisters. But the extent of the damage may have caught some by surprise.

There was also strength in the equities markets to deal with, as well as an avalanche of selling across the board in commodities.

But analysts were mostly abandoning talk that gold will follow oil, and focusing instead on the role of the dollar, which has been buoyed of late by suggestions that an interest rate hike might come before the end of the year.

“With the dollar stabilizing, gold could fall quite a bit,” said Matt Zeman, a metals trader at LaSalle Futures Group in Chicago. “There’s a lot of talk about inflation, which works both ways for gold. If the Fed does start tightening, that will strengthen the dollar and could really pop the commodity bubble.”

It’s an interesting equation, for sure. Inflation is dead certain to pick up as the effects of record-high oil and gasoline prices work their way through the economy. One sign of things to come arrived on Wednesday, with the announcement by Dow Chemical that it was raising prices of its products by 20%. Everyone uses Dow products.

So, will gold emerge in its traditional role as a hedge when inflation really starts to pick up? Or will the Fed’s response, which has to be tightening interest rates, hurt gold by propping up the dollar? Stay tuned.

Source: Precious metals slammed once again – Strong dollar, weaker oil cited