U.S. dollar index was flat at $78.50.
A stronger dollar makes dollar based commodities more expensive to buy in other currencies, which results in weaker investment demand and lower prices. However, in general investors are shying away from riskier assets on fears that China will restrict lending. On Tuesday, Chinese banks were required to raise their reserve ratio by 50 basis points igniting fears that the country would curb lending even further. Also weighing on investors' risk appetite are worries over Ben Bernanke's nomination approval as well as President Obama's so-called war on banks. Investors will look to the Federal Reserve's interest rate decision due out this afternoon. Although rates are expected to remain unchanged, investors will look for clues for a sooner than expected interest rate hike. Despite short term pressure, many analysts are still bullish for the long term. "We anticipate that metals prices will remain volatile over the near-term, particularly with the Chinese New Year approaching," says Anthony Rizzuto Jr., managing director at Dahlman Rose & Co. in his morning metals note. "But we continue to anticipate that over the medium to long term, consumption will trend higher, which should be supportive of prices." Silver prices were falling 15 cents to $16.70 while copper was slipping 4 cents to $3.29. Platinum and palladium were sliding to $1,529 and $424, respectively on news that Toyota ( TM) will halt sales of select models in the U.S. due to safety concerns. This could hurt short term demand for the metals, which are used in car production. Mining stocks, a more leveraged way to invest in gold, were mixed. Barrick Gold ( ABX) and Newmont Mining ( NEM) were trading at $36.10 and $44.12, respectively. Barrick Gold is currently seeking legal action to resume mining at the Cortez Hills project, which was halted due to a court ruling over environmental issues. Other large cap miner Kinross Gold ( KGC) was slipping 1.15% to $17.15. Shares of Freeport McMoRan Copper & Gold ( FCX) were falling 0.53% to $71.61. The company has benefited from China's stimulus and infrastructure spending. Fears of a pending slow-down would hurt short term copper demand. Southern Copper ( PCU) was flat at $29.18. Yamana Gold ( AUY) was down 0.85% to $10.51 while AngloGold Ashanti ( AU) was lower by 1.21% to $37.63. Shares of SPDR Gold Shares ( GLD) were rising 0.15% to $107.72. Alix Steel in New York.