By Moming Zhou, MarketWatch NEW YORK (MarketWatch) -- Gold futures declined Thursday amid a slump in crude-oil prices, as the U.S. dollar rose against a basket of major rivals, reducing gold's appeal as an alternative investment. Gold for December delivery erased earlier gains, falling $15.50, or 2.1%, to end at $738.50 an ounce on the Comex division of the New York Mercantile Exchange. In energy trading, crude-oil futures fell from an intraday high above $70 a barrel to close at $65.96 a barrel. Lower oil prices reduce demand for gold as a hedge against inflation. Read Futures Movers. The U.S. dollar also changed course, erasing earlier losses and rising against the euro and the British pound. The dollar index which tracks the value of the greenback against a basket of other major currencies, rose 1.2%. Dollar-denominated gold prices often move in the opposite direction of the greenback. Read Currencies. Gold closed up nearly 2% Wednesday. In earlier trade Thursday, the benchmark contract had risen to $778.30, the highest since Oct. 21, on speculation that global interest-rate cuts will spur inflation. "While gold may take some solace from its recent base building, we still expect rallies to be used as selling opportunities for the time being," said James Moore, a precious metal's analyst at TheBullionDesk.com. Interest-rate cuts Some analysts said gold prices could rebound soon on inflation worries as central banks around the world cut interest rates. The U.S. and China cut their key interest rates Wednesday. The European Central Bank and the U.K. are both expected to move next week, while the Bank of Japan may cut as soon as Friday. "Further cheap-money policies and unprecedented digital money creation will likely be very inflationary in the coming months," said Mark O'Byrne, executive director at Gold and Silver Investments. In gold spot trading, the London gold-fixing price -- used as a benchmark for gold for immediate delivery -- stood at $755.25 an ounce Thursday afternoon local time, down $8.75 from Wednesday afternoon. Gold in the SPDR Gold Trust , the largest gold exchange-traded fund, remained at 749.21 tons Wednesday, unchanged from Tuesday, according to the latest data from the fund. Gold held by the fund hit a record high of 770.64 tons on Oct. 10. The SPDR Gold Trust fell 1.9% to close at $72.57 on the New York Stock Exchange. Separately in economic news, the U.S. economy contracted at a 0.3% annualized rate in the third quarter, the largest since the end of the last recession in late 2001, according to the Commerce Department. The drop was close to economists' expectations that the economy would shrink at a 0.5% annual rate. In other metals trading, December copper slumped 9.5% to $1.8905 a pound, while December silver fell slightly to $9.785 an ounce. December palladium was almost flat at $196.70 an ounce, with January platinum ahead 1.7% at $830.60 an ounce. The Amex Gold Bugs Index climbed 3.9% to close at 202.67 points. IShares Gold Trust fell 2.3% to end at $72.60, while the iShares Silver Trust ETF added 0.1% to finish at $9.68. The Market Vectors-Gold Miners ETF tacked on 4% to close at $21.70.

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