A sell-off in commodities continued Wednesday, sending oil, gold and other metals falling even as the dollar weakened.
Oil prices fell for a sixth straight day, while gold extended its decline to a fourth day, dropping 2 percent to its lowest level in nearly a month.
After rallying for much of this year, commodities prices have slumped since the beginning of December as investors shift out of risky assets and into safe havens like the dollar and Treasurys. Growing doubts about the sustainability of the economic recovery and concerns over sovereign debt loads have boosted the dollar in recent days, making commodities less appealing for foreign buyers.
At the same time, investors suspect that the dollar's steady decline since March may have run its course and that the Federal Reserve will move to raise interest rates sooner than later.
On Wednesday, the dollar weakened slightly from a five-week high against the euro, but was off its lows by late afternoon.
Gold for February delivery dropped $22.50 to $1,120.90 an ounce. Prices have fallen $106.60, or 8.7 percent, from a record high of $1,227.50 hit last Thursday. The metal is still up 26.8 percent for the year.
Other metals dropped sharply as well. March silver dropped 62.7 cents, or 3.5 percent, to $17.18 an ounce, while January platinum lost $31.20, or 2.2 percent, to $1,409.20 an ounce. Palladium fell 2.5 percent.
March copper futures fell 4.15 cents to $3.1235 a pound, after earlier hitting a 15-month high of $3.3185.
Analysts say investors are pocketing some of the big profits they've made in commodities this year and that the pullback in gold and other metals is temporary.
"Things had gotten a little out of hand on the upside," said Caesar Bryan, portfolio manager of the GAMCO gold fund.
The conditions for higher gold are still firmly in place, Bryan said. For now, the Federal Reserve plans to keep rates low, which will prevent the dollar from strengthening significantly, he said.
The Federal Reserve has kept its benchmark interest rate near zero this year to spur the economy, weakening the dollar and making assets like stocks and commodities more attractive.
Elsewhere on the Nymex, oil prices tumbled following more evidence that energy demand remains weak. In its weekly report, the Energy Information Administration said gasoline supplies grew, while gasoline use dropped to its lowest level since early July.
Oil prices have also benefited from a weaker dollar this year, rising more than 50 percent since March. However, many analysts believe that a continued rise in prices won't be sustainable without a pick up in demand.
Light, sweet crude for January delivery plunged $1.95 to $70.67 a barrel after falling to $70.13 earlier in the day, the lowest level in two months.
Gasoline futures gave up 6.73 cents to $1.8573 a gallon, while heating oil futures fell 8.16 cents to $1.9093 a gallon.
On the Chicago Board of Trade, March wheat futures fell 4.25 cents to $5.3525 a bushel, while March corn lost 1.5 cents to $3.835 a bushel.
January soybeans fell 15.5 cents to $10.285 a bushel.
Other soft commodities, like sugar and coffee, fell. Bucking the trend, December cocoa futures jumped $49 to $3,417 a ton, after earlier hitting a contract high of $3,430.