Updated from 11:22 a.m. EDT

Gold and metals fell sharply Tuesday, as crude oil prices dropped and the dollar advanced after Monday's hawkish comments from

Federal Reserve

Chairman Ben Bernanke.

Gold for August delivery lost $14, or 2.2%, to close at $631 an ounce. Among other metals, silver for July delivery dropped 45 cents, or 3.6%, to $11.84 an ounce and copper for July delivery fell 11 cents, or 3%, to $3.48 a pound.

Bernanke's commentary "simply seemed to yank the rug out from under the bull camp in gold, as higher U.S. interest rates are seen as an effective move against inflation and higher rates will also provide some support to the dollar," writes Nell Sloane, metals analyst NSFutures.com.

"Perhaps more importantly is the fact that higher

fed funds rates will probably serve to slow an already slowing US economy," she adds.

Commodities markets, and especially metals, have experienced weakness and volatility since last month amid concern that central banks are raising interest rates to curb growth and inflation pressures, notably from soaring commodities prices.

Amid these jitters, Bernanke gave commodities bulls exactly what they didn't want to hear.

Speaking after the close of Nymex metals futures trading on Monday, Bernanke said that even if the U.S. economy seems poised to slow, inflation remains at or above his preferred range.

In case there was any ambiguities left, St. Louis Fed President William Poole, in an interview in Tuesday's online edition of

The Wall Street Journal

, said that a slowing economy isn't enough to restrain inflation and that the Fed should maintain an "upside bias" in setting interest rate policy.

Poole's comments were followed by those of Fed Governor Susan Bies, who votes on rates. Inflation, Bies said, is "higher than I'd like to see" and economic growth needs to cool off.

Not surprisingly, all these comments revived expectations of a June rate hike and boosted the dollar. A stronger greenback pressures the value of dollar-denominated commodities such as gold, as it takes less of the currency to buy the same amount of gold.

Gold, in particular, has benefited from expectations that the dollar will resume a multiyear decline once the Fed stops raising interest rates. These expectations were frustrated last month amid stronger-than-expected inflation data. But a weak employment report on Friday had again fueled the market's hopes until Bernanke's comments.

Following Bernanke's speech on Monday, the market was pricing in 72% odds of a June rate hike compared with 50% previously. These odds rose to 80% on Tuesday, according to Miller Tabak.

The Dollar Index, which tracks the greenback against a basket of key currencies, was recently up 0.8%.

While many observers believe that the commodities bull run of the past few months was mostly speculative, its fundamental underpinnings were based on a strong global growth outlook.

In daily commentary, analysts with the commodities research group Hightower Report said that copper and silver, which both have more of an industrial use than gold, are showing increasing signs of weakness amid concern about global growth.

This, they wrote, suggests that "the physical-demand-driven metals markets are starting to diverge with the precious metals markets." At the same time, "the support or non support from the dollar might become a dominating issue for gold as the market factors slower global growth."

Meanwhile, signs of easing tensions over Iran's nuclear ambitions pressured crude oil prices and removed further support for gold, which acts as both a hedge against inflation and a safe haven asset.

Gold's surge to a 26-year high of $730 an ounce last month was helped by oil nearing $75 a barrel as tensions mounted with Iran, the world's fourth-largest producer of crude.

On Monday, crude and gold again rose after Iran's religious leader Ayatollah Ali Khamenei said that Iran might cut off its supplies of crude should the U.S. make the "wrong move".

But on Tuesday, Iran's chief nuclear negotiator Ali Larijani said that a package of incentives offered last week to induce Iran to stop sensitive nuclear research contains "positive steps," according to the

BBC

.

Crude oil for July delivery was recently down 10 cents at $72.50.

Overall, shares of metals miners were sharply lower in recent action. The Philadelphia Gold and Silver index was recently down 2.6%, while the Amex Gold Bugs index was down 2.9% and the CBOE Gold index was down 2.8%.

Among the biggest decliners,

Gold Fields

(GFI) - Get Report

was losing 5%,

IamGold

(IAG) - Get Report

was down 4%, and

Agnico-Eagle Mines

(AEM) - Get Report

was down 4.2%.

Shares of

AngloGold Ashanti

(AU) - Get Report

were down 4%, even after Citigroup upgraded the stock to buy from hold.

The newly launched

Market Vectors-Gold Miners

(GDX) - Get Report

exchange-traded fund, which tracks the performance of the Amex Gold Miners Index, was down 2.6%. (Click

here for more on the GDX.)

ETFs tracking the metals themselves also were down. The

iShares Silver Trust

(SLV) - Get Report

was down 1.8% and the

StreetTRACKS Gold Trust

(GLD) - Get Report

was down 1.2%.