By Moming Zhou, MarketWatch NEW YORK (MarketWatch) -- Gold futures closed down 1.4% Thursday, erasing earlier gains, amid slumps in U.S. stock markets and crude-oil prices as a strengthening dollar pushed most commodities lower. Gold for December delivery fell $10.20 to end at $732.20 an ounce on the Comex division of the New York Mercantile Exchange. It had jumped to $761.30 earlier. Gold is now 27% lower than the record high above $1,000 hit in March. In currencies trading, the dollar gained against the euro and the British pound after major European central banks cut their interest rates. The dollar index , which tracks the value of the greenback against other major currencies, rallied 1.3%. See Currencies. Gold was falling "as the dollar is strengthening," said Jon Nadler, senior analyst at Kitco Bullion Dealers. Gold prices and the dollar tend to move in the opposite direction.U.S. stock markets fell sharply Thursday, with the Dow Jones Industrial Average down more than 4%, as mostly bleak retail sales and a forecast for lower quarterly sales from Cisco Systems Inc. underscored the troubled state of the economy. See Market Snapshot. Meanwhile, crude utures slumped more than 6% to near $60 a barrel. The Reuters/Jefferies CRB Index (CRB: 257.10, -10.87, -4.1%) , a benchmark gauging the prices of major commodities, fell 2%. Rate cuts The Bank of England took drastic action earlier Thursday, slashing its key interest rate to 3% from 4.5% previously. The European Central Bank, which sets monetary policy for the 15-nation euro zone, and the Swiss National Bank also moved to cut rates by smaller amounts. See related story. Last week, the Federal Reserve cut key interest rates by half a percentage point, to 1%. Some analysts said global rate cuts could engender inflation worries and push gold prices higher. "With the Bank of England and the ECB cutting interest rates, central banks are attempting to inflate their way out of a deflationary slump," said Mark O'Byrne, executive director at Gold & Silver Investments. Gold is often seen as a hedge against rising prices. The Bank of England said that the global banking system "has experienced its most serious disruption in almost a century" and that there's been a "very marked deterioration in the outlook for economic activity." The bank's warning was echoed by the International Monetary Fund, which issued an updated forecast in which it projected that world economic growth would fall to a 2.2% rate in 2009, down from 3.7% pegged for 2008. The IMF informally defines a recession as global growth at a rate below 3%. See full story. In other metals trading, December copper fell 5.1% to $1.7255 a pound. December silver lost 3.8% to $10.055 an ounce, and January platinum sank 4.7% to $838.30 an ounce. Bucking the trend, December palladium rose 1.6% to $222.60 an ounce. Spot trading In gold spot trading, the London gold-fixing price -- used as a benchmark for gold for immediate delivery -- stood at $754.50 an ounce Thursday afternoon local time, almost unchanged from Wednesday afternoon. Gold in the SPDR Gold Trust, the largest gold exchange-traded fund, remained at 749.21 tons Wednesday, unchanged since Oct. 27, 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 1.1% to $72. In other equities, the Amex Gold Bugs Index which tracks the share prices of major gold companies, lost 5.6% to 201.67. IShares Gold Trust skidded 1.3% to $72.06, while the iShares Silver Trust ETF lost 2.8% to $9.92. The Market Vectors-Gold Miners ETF slumped 7% to $21.84. Among mining companies, shares of Barrick Gold Corp. , the world's largest gold miner, fell 6.2% to $23.40, while Goldcorp Inc.lost 7.4% to $21.20.

Source