Gold futures on the COMEX Division of the New York Mercantile Exchange extended its losing streak into a fifth session on Wednesday, as lack of confidence in Europe pushed investors into the safety of the U.S. dollar, rather than gold. Silver and platinum both slumped.

The most active gold contract for February delivery dropped 31. 4 dollars, or 2 percent, to 1,564.1 dollars per ounce.

The dollar index, which tracks the U.S. dollar's performance against six major currencies, climbed to 80.471 from 79.792 late Tuesday, as many investors are concerned with Thursday's Italian debt auction and the fragility of the European Union's debt crisis in general.

A trader said gold prices were getting hammered on Wednesday, settling at the lowest level for a most active gold contract since mid-July, as a stronger dollar curbed demand for the metal as an alternative asset.

Meanwhile, gold prices were also battered, as year-end sellers tried to take profit from still-profitable precious metal before the end of the year.

"It has become apparent with the low volume that many precious metals traders have packed it in until the first of the year. With light volume and high volatility the reaction to economic data will be generally more overdone as it was today," said Mike Daly, a gold specialist with PFGbest here in Chicago.

Silver for March delivery lost 1.506 dollars, or 5.2 percent, to 27.234 dollars per ounce. Platinum for January delivery plunged 46.2 dollars, or 3.2 percent, to 1,387.7 dollars per ounce.