Gold prices lost about 1% to $765.50 in the spot market despite a weaker US Dollar across the major currency pairs. A contributing factor was probably some easing of demand in India and the raging losses today in oil.

The December crude contract dropped 6.5% to $45.21. Seeing prices drop this fast in the commodities market may be a contributing factor pushing traders away from gold as an inflation hedge. The fact that the most recent consumer inflation numbers showed a moderating pace is certainly on the minds of many traders and investors.

An increase in uncertainty in the US capital markets will likely continue to put the USD upward in the near term and this is one of the things that gold traders may be counting on as they anticipate an accelerating decline in metals. Further evidence of gold bears is the open interest in the Jan 2010 options on Street Tracks Gold Trust (GLD), the popular gold ETF, which are still 3:1 in favor of puts. 

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