Gold futures Continue Downward Spiral: off $36 in Three Days

Gold futures dropped by over $21 today, continuing its plunge, which now stands at $36 an ounce over the last three sessions. Futures are now at the lowest levels since the middle of June.

As with all commodities denominated in U.S. dollars, the strengthening greenback continues to put pressure on the yellow metal, decreasing its demand.

Even so, there was an upward move in gold prices in response to the Federal Reserve keeping the interest rates unchanged at 2 percent.

Still, Jon Nadler, a senior analyst at Kitco Bullion Dealers, had this to say about the hold on interest rates in relationship to commodities, including gold:

"The Fed meeting does nothing to alleviate the continuing exodus from commodities even though the central bank held its cards very close to the vest. September's meeting, however, might be quite a bit different in both tone as well as results."

Today's gold futures finished the session at $886.10 on the Nymex, a $21.80 drop. It had reached as high as $903.90 earlier in the day.

Responses to this was all over the map, as a number of analysts believe this is the prelude to a drop to maybe about $845, which would then start a rally that could bring gold back to record-breaking levels, reaching as high as $1,150 an ounce by the end of 2008.

Others see no indication that gold will make any significant upward moves in the short-term.

Much of the discussion has centered around whether the U.S. dollar rally is real, or it's simply a correction related to the bear market. Most seem to think it's the latter, and a bottom for gold is close at hand, with nothing but upside potential in the near future.

Of course if that assumption is wrong, gold could have a longer way to drop before a recovery begins.