Gold futures ended sharply lower on Thursday, down from a one-month high as the dollar rose against other major currencies and crude oil dropped from a record, eroding the appeal of the precious metal as a hedge against inflation.

Gold for June delivery dropped $10.30 to end at $918.30 an ounce on the New York Mercantile Exchange. Earlier, the price reached $935.40, the highest since April 18.

The dollar rose to its highest level in a month against the euro on speculation the Federal Reserve will raise borrowing costs by the end of the year to curb inflation. According to futures on the Chicago Board of Exchange, bets reveal a 30 percent chance the central bank may raise its target interest rate by a quarter-percentage point to 2.25 percent in September, up from 21 percent yesterday.

The dollar index, which tracks the performance of the greenback against a basket of other major currencies, gained 0.4 percent to 72.18.

Oil futures dropped as much as 2.3 percent today to $130.07 a barrel after earlier reaching a record $135.09.

Dollar strength typically pressures dollar-denominated commodities, such as gold and crude oil, as it makes them more expensive for holders of other currencies.

A day of profit-taking in crude oil put a significant damper on precious as well as base metals, highlighting just how much of their recent revival was in sympathy with the runaway energy complex, said Jon Nadler, senior analyst at Kitco Bullion Dealers.

A rising level of bets that the Fed will not only not cut rates at its next meeting in June, but that it will begin thinking about raising them as the year wears on supported the dollar, Nadler said.

Also on the Nymex, silver futures for July delivery dropped 2.5 cents to $18.025 an ounce. The price has advanced 21 percent this year.

July platinum fell $37.30 to end at $2,183.80 an ounce and June palladium futures dropped $6.25 to end at $456.95 an ounce. July copper fell 3 cents to $3.71 a pound.

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