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Commodity prices plunged on Thursday as debt problems in major European countries sent the dollar higher, while a rise in US weekly jobless claims raised demand concerns.

Oil slumped almost 5% in New York, sinking $3.84 to $73.14, the biggest percentage decline since July last year. It fell below $73 at one stage.

The euro came under pressure Thursday, dropping to a seven-month low against the dollar as worries about debt in Greece, Portugal and Spain caused a rush to the relative safety of the US currency.

Meanwhile, US Labor Department figures showed initial claims for unemployment benefit in the US increased by 8,000 to a bigger than expected 480,000 last week, the highest figure for seven weeks.

On the metals exchange, gold fell the most in 16 months yesterday.

The yellow metal tumbled $49, or 4.4%, to $1,063 an ounce on the New York Mercantile Exchange. It hasn't fallen that much in a single session since October 2008.

Traders also fear that China may be winding down its monetary stimulus measures, putting added pressure on commodities.

Copper fell more than 3%, platinum dropped 4%, while palladium also lost ground.