Gold plunges as dollar goes up sharply

Gold futures on the COMEX Division of the New York Mercantile Exchange tumbled to a two-week low on Wednesday as dollar strengthened on safe-demand. Silver and platinum both dropped.

The most active gold contract for February delivery slid 27.40 U.S. dollars, or 2.4 percent, to finish at 1,112.60 dollars an ounce.

Shortly before pit trading closed, the precious metal touched as low as 1,106.80, the weakest level since Jan. 4.

Dollar rallied on Wednesday on concerns that China’s efforts to keep its economy under control could hurt a global recovery.

A Chinese top banking regulator said that China will increase monitoring of banks to prevent speculative bubbles in areas like real estate.

China has taken steps, such as increasing bank’s reserve rate, to cool its rapid growth.

Investors, who think China’s lower growth may dim the world’s economy recovery, lost interests on high-risk assets and flocked to dollar for safe-haven.

By the end of gold floor trading time, the dollar index, a gauge measuring the greenback’s value against six major currencies, climbed more than one percent to 78.53, which strongly reduced gold’s hedge appeal against dollar’s depreciation.

The sharp drops in stock and energy markets put additional pressure on the yellow metal.

The Dow industrials fell by the most since late October on Wednesday, and the benchmark oil contract for February delivery in New York dropped almost 2 dollars a barrel.

March silver was down 92 cents to 17.88 dollars per ounce. April platinum lost 21.80 dollars to 1,617.60 dollars an ounce.