Gold Prices Plummet on Dollar Strength

NEW YORK (TheStreet ) -- Gold prices plummeted on Thursday on a stronger U.S. dollar and disappointing weekly U.S. jobless claims.

Why Gold Could Keep Sinking

Gold for April delivery was slipping $45.80 to $1,066.20 an ounce at the Comex division of the New York Mercantile Exchange. Prices have traded as high as $1,112 and as low as $1,060.40. The U.S. dollar index was rising 0.55% to $79.85.

European sovereign debt fears from Spain, Portugal and Greece dragged on the euro, bringing the currency down to a seven-month low against the U.S. dollar. The continued strength in the dollar is putting pressure on gold, as the metal is more expensive to buy in other currencies. Gold prices are finding support from physical buying at the $1,080 level, but their failure to push past $1,125 creates a tight trading range.

Gold prices are also coming under pressure ahead of Friday's U.S. nonfarm payroll report. Analysts were hoping for positive news, but on Thursday the Labor Department said first-time applications for unemployment benefits rose more than expected last week.

"[It doesn't] bode very well. Dow futures took it pretty bad," says Jon Nadler, senior analyst at Kitco.com. "The dollar became a safe haven play once again and gold broke back under the $1,110 mark after starting the week pretty enthusiastically." Many analysts expect this risk aversion trade to continue and the dollar to remain a safe haven asset.