NEW YORK (MarketWatch) -- Gold futures dropped more than 3% Tuesday in a broad-based commodities sell-off, as strength in the U.S. dollar exerted heavy selling pressure on the precious metal.

Gold for June delivery tumbled $33.70, or 3.6%, to close at $887.80 an ounce on the New York Mercantile Exchange. The precious metal earlier fell to a low of $876.30.

Other metals futures were also sharply lower, with platinum selling off 5.2%.

The Reuters-Jefferies CRB index, a benchmark barometer gauging the prices of major commodities, fell 0.3% to 385.58.

"Everything from cotton to copper and soybeans to silver is off sharply," said Jon Nadler, senior analyst at Kitco Bullion Dealers. "The ever-weakening dollar had prompted many a fund to pile money into the sector since September last year, pushing values of some commodities well beyond fundamentals."

"But now, as the dollar is staging somewhat of a comeback, even if a temporary one, the niche is being drained of money quite fast," Nadler said.

With perceptions that the credit freeze might be thawing, hedge funds appear to be turning away from until now ultra-hot commodities, he said.

Zachary Oxman, senior trader at Wisdom Financial, said, "You're seeing heavy selling pressure and significant technical damage [in gold prices]."

"I'd look for further selling into the $870 level at this time," Oxman said.

Culminating a tumultuous quarter, the benchmark gold contract lost $15, or 1.6%, to end Monday's trading back at $921.50 an ounce.

For March as a whole, gold futures lost $50.60 -- a drop of 5.2%. But for the first quarter, the precious metal still turned in a stellar performance, gaining $86.60 an ounce, a 10.3% increase.

"Given gold's recent movements, the yellow metal will remain vulnerable to selling pressure in the coming sessions," said James Moore, analyst at TheBullionDesk.com.

In a research note, Moore cited how the second quarter's "traditionally weaker than the first due to general market cycles."

The dollar extended gains Tuesday, gaining more than 2% against the yen as stocks soared after the Institute for Supply Management's manufacturing index unexpectedly inched higher, suggesting to some that the U.S. recession could be mild. See Currencies.

The dollar index, which measures the greenback against a basket of currencies, was at 72.615, up from 71.749 late Monday.

The ISM index rose to 48.6% in March from 48.3% in February. The consensus forecast of estimates collected by MarketWatch was for the index to slip to 47.0%. Readings below 50 indicate contraction.

Platinum tumbles 5%

Led by platinum, other metals futures also posted sharp losses on the Nymex. July platinum futures tumbled $105.60, or 5.2%, to $1,937.80 an ounce.

May silver futures fell 42 cents, or 2.4%, to $16.89 an ounce and June palladium fell $1.60, to $448.60 an ounce. May copper futures dropped 2.1 cents, or 0.5%, to $3.81 a pound.

Crude-oil futures also fell. See Futures Movers.

On the equities side, the Amex Gold Bugs Index HUI, declined 2.9% to 425.88 points.