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 Commodities are priced in dollars and, as a result, demand has a link to the dollar's strength against other world currencies. As the dollar has plunged in recent months, that relationship has grown increasingly important as foreign buyers snap up everything from agriculture products to zinc, as prices in dollars appear cheaper. But when the dollar rebounds, demand can temporarily evaporates. Copper for December delivery dropped 4.35 cents to $3.6425 a pound on the New York Mercantile Exchange, while silver futures slipped 14 cents to $13.715 an ounce.
The decline in the metals market also mirrored Wall Street's retreat on Tuesday, as investors pulled back from riskier investments following Federal Reserve Chairman Ben Bernanke's comments that a housing slump will probably be a "significant drag" on economic growth into next year.
In a speech to the New York Economic Club late Monday, Bernanke also cautioned that while conditions in financial markets have improved since this summer's turmoil, "a full recovery of market functioning is likely to take time, and we may well see some setbacks."
"For the time being, modest declines in U.S. equity markets should not unhinge the advance in commodities, but if the selling is to pick up steam in a big way, commodities will most likely get swept up in the downdraft," wrote MF Global analyst Edward Meir, in a report.
The Dow Jones industrial average dipped 51.86, or 0.37 percent, to 13,932.94 in midday trading. Broader stock indicators also moved lower.
Industrial metals prices declined overseas, as well. Zinc and lead prices fell sharply on the London Metal Exchange, while nickel, copper and tin prices also weakened.
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 The U.S. dollar had a modest recovery after trading near its all-time lows versus the euro on Monday. The 13-nation euro bought $1.4169 at midday, off its peak $1.4282 from Oct. 1.
Meanwhile, the greenback's bounce took its toll on the agriculture market, where corn, soybean and wheat prices slid.
December corn fell 6.25 cents to $3.5575 a bushel, while November soybeans dropped 11 cents to $9.76 a bushel. December wheat tumbled 15.5 cents to $8.18 a bushel.
While other commodities fell back, energy prices surged as tensions in the Middle East raised concerns about potential supply disruptions. However, many analysts contend supplies of crude oil remain ample and point to an increase in speculative trading in the market as one reason for oil's sharp surge higher.
Light, sweet crude for November delivery gained $1.70 to $87.83 a barrel, after earlier touching as high as $88.05 a barrel. Gasoline futures rose 2.1 cents to $2.1785 a gallon, while heating oil futures added 2.73 cents to $2.3345 a gallon.
Analysts expect the Energy Information Administration will report rising inventories of crude oil and gasoline in its weekly report on Wednesday.
"The fundamentals do not warrant prices this high," said Amanda Kurzendoerfer, commodity analyst with Summit Energy Services Inc. "You see stock levels that are fairly robust for this time of year."
Gold prices rose as some investors hedged against the inflationary rise in oil prices. December gold gained $2.10 to $764.30 an ounce on the Nymex.
[Associated Press; by Lauren
Villagran]
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