Gold dropped more than 2 percent to its lowest level ($904.75) in a month on Thursday amid a broad based sell off in commodities, leading to declines in oil, base metals and agricultural products and as funds cashed in after pushing the metal to a record above $1,000 an ounce this week. Platinum, palladium and silver also fell. A smaller than expected US interest rate cut was an excuse for the funds to exit gold. A decline in global economic growth in 2008 – 09 will mostly dampen demand and prices for commodities if the slowdown is substantial, the International Monetary Fund said on Wednesday. This week, the need for liquidation of long commodity positions to finance losses elsewhere contributed to the commodity selling. Plus the dollar got to such levels of extreme that some consolidation has been seen. Commodities was the one area that had been untouched by the credit chaos but that seems to be changing. Hedge funds and banks were having to raise cash to meet margin calls by taking profits on their commodity positions. Gold eased to $910 an ounce on Friday when funds cashed in bullion to cover losses in other financial markets. Gold has lost around 11 percent in value since racing to an historical high of $1,030.80 an ounce on Monday. The long – term outlook for gold remained bright because of strong investor interest in the metal used as a hedge against inflation and expectations of more interest rate cuts in the United States in April. Gold and other metals could fall further as the market has surged too rapidly. But falls in gold could be limited around $850 where demand for physical gold could start growing.

The dollar firmed against the euro ($1.5395 on Thursday), underpinned by sliding gold and oil prices, falling stocks and in spite of investor anxiety over troubled credit markets. FED brought key interest rates to 2.25 percent on Tuesday after cutting them by 0.75 percent, against market expectations for a 1.0 percent cut. Analysts suspected a combination of factors had driven the US dollar higher, including the decline in commodities, the urge among investors to switch from riskier assets back into dollars ahead of the long Easter weekend and the need for the dollar to adjust the heavy losses sustained this month. The dollar was steady against the euro ahead of Easter holidays in Europe and US on Friday, holding gains made the previous day, when investors sold commodities such as oil and gold and bought back the US currency. The dollar made its biggest gain against the euro since mid – December on Thursday as oil briefly fell below $100 barrel for the first time in two weeks and gold dropped to a one – month low. The dollar has since trimmed its losses, due partly to beter than expected quarterly earnings at top US investment banks, and news that Fannie Mae and Freddie Mac won government approval to pump $200 billion more into troubled US mortgage markets. But doubts lingered about the outlook for the dollar, due to Federal Reserve’s sharp rate cuts. However, the turmoil in credit markets, concerns about a US recession and fears of further insolvency among financial institutions were still a heavy load on the currency. Besides, collapse of Bear Stearns (which has been acquired by JPMorgan Chase subesequently) fuelled concerns about other possible failures, as well. As the latest news, US Federal Reserve expanded lending to securities firms for the first time since the Great Depression.