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Sharp Drop for Gold Prices

Silver is also lower.

Gold prices were hitting the skids Tuesday on the back of modest strength in the greenback.

Benchmark contracts for gold bullion were plunging $19.50 at $734.60 an ounce in recent action on the Comex division of the New York Mercantile Exchange. The price of dollar-denominated assets tends to fall as the value of the U.S. currency appreciates.

The exchange-traded funds that hold inventories of the metal were falling also, with

streetTracks Gold Shares

(GLD) - Get Report


iShares Comex Gold Trust

(IAU) - Get Report

both down close to 2%.

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In addition to being undermined by the action in the U.S. dollar, gold prices were also weakened by deteriorating short-term chart formations, explains Ashraf Laidi, chief foreign exchange analyst at CMC Markets in New York.

"We cautioned three weeks ago that gold prices have rarely exceeded 10% above their

200-day moving average over the past year," he says.

Some form of a pullback was overdue, he explains, predicting that gold may "now be expected to extend its retreat to as low as $710 per ounce."

Silver prices followed gold lower, with December futures contracts off 41 cents at $13.45 an ounce. Copper prices were losing 2 cents at $3.68 a pound.

Among stocks,

Harmony Gold Mining

(HMY) - Get Report

was shedding almost 6%, dragged lower by the falling price of gold.

Most of the rest of the commodities complex was weak also, with corn and cocoa leading the way down. Corn prices were losing 1.8% at $3.62 a bushel, while cocoa prices were slipping 1.2% at $2,005 a ton.