Gold futures fall sharply on dollar, oil

NEW YORK (MarketWatch) -- Gold futures fell sharply Tuesday, as strength in the U.S. dollar and declining oil prices pressured investment demand for the precious metal. Gold for June delivery dropped $18.70 to end at $876.80 an ounce on the New York Mercantile Exchange.
"Anticipation about the Fed meeting's eventual results turned into apprehension that the massive slide in rates seen since September will not only come to an end shortly, but will likely be partially reversed after a period of no action," said Jon Nadler, senior analyst at Kitco Bullion Dealers.
The Federal Reserve's interest-rate meeting begins Tuesday afternoon. The statement will be released on Wednesday at 2:15 p.m. Est. See The Fed.
Most economists expect a quarter-percentage point cut from the central bank. The rate cut would bring the Fed's target for overnight interest rates to 2%, the lowest level since December 2004.
Many economists said they wouldn't be surprised if the Fed paused at this meeting. Some want the Fed to pause to signal that it is prepared to get tough about inflation.
"I think the main driver today is the pricing in of the next Fed rate cut and the strength in the dollar," said Zachary Oxman, a senior trader at Wisdom Financial.
"It is quite possible that the Fed has cut to the point where credit will be loosening, which would signal a renewal for the U.S. economic growth cycle," Oxman said. "If this is the case, watch for a rotation out of gold and flight-to-quality trades and back to the stock market."
The dollar held onto most of its gains Tuesday. The dollar index, which tracks the performance of the greenback against a basket of other major currencies, gained 0.3% to 72.83

"Gold is again under pressure with the dollar continuing to strengthen and oil continuing to sell off, but caution remains the predominant theme ahead of the Federal Reserve's interest rate decision," said Mark O'Byrne, executive director of Gold and Silver Investments Ltd., in a research note.
Crude-oil futures fell sharply, as strength in the U.S. dollar and news that BP's Forties pipeline will restart operation within days pressured energy prices.