SAN FRANCISCO (MarketWatch) — Gold futures dropped $11 an ounce Tuesday to close at their weakest level in three sessions as a rally in the dollar against other global currencies dulled investment demand for the precious metal.

Federal Reserve Chairman Ben Bernanke signaled in a earlier speech his discomfort with the weak dollar’s ramifications for the U.S. economy. See Fed story.

“The proximal cause of today’s drop in gold was … Bernanke’s comments regarding commodities and the dollar,” said Brien Lundin, editor of Gold Newsletter. “The fact that he broke ranks with tradition and addressed the status of the dollar — which is the Treasury Secretary’s bailiwick — was remarkable enough to send a shudder through the gold and currency markets,” he said in emailed comments.

Gold for August delivery traded as low as $878 an ounce on the New York Mercantile Exchange. The benchmark contract fell $11.50 an ounce to finish at $885.50, its lowest closing level since May 29.

“Ben Bernanke’s dollar-supportive words had a chilling and immediate effect on both gold and oil,” said Jon Nadler, an analyst at Kitco Bullion Dealers.

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