SAN FRANCISCO (MarketWatch) -- Gold futures deepened their slide by nearly 2% as U.S. stocks sold off and the U.S. dollar gained, with trading influenced by a drop in a regional manufacturing survey and concern about President Barack Obama's plans to restrict bank risk. Gold earlier had fallen after strong Chinese data fueled continuing concerns about liquidity removal from the global financial system and gave a boost to the dollar. The February contract traded down $22, or 2%, at $1,090.6 an ounce. Copper futures reversed and moved lower 5 cents, trading down 1.7% at $3.2975 a pound. "Gold has been very responsive to the dollar of late," said Leonard Kaplan, president of Prospector Asset Management. "As the dollar rallies, gold is going to go a lot lower." Kaplan also said that gold futures would be hampered by President Barack Obama's upcoming bank proposal, which was expected later Thursday. Obama was expected to propose new limits on the size of "too-big-to-fail" banks and the risks they may take. "That will hurt all the markets," Kaplan said. The proposal aims to deter commercial banks from becoming so large that they put the broader economy at risk, and also to prevent them from growing large enough to distort normal competitive forces, according to The Wall Street Journal. Gold had briefly pared losses after the Philadelphia Fed said its index of manufacturing activity in the Philadelphia region edged lower in January, worse than expected. A second report, from the Conference Board, showed an index of leading U.S. economic indicators gained 1.1% in December, stronger than forecasts. The dollar pared its gains after those midmorning reports, making hard assets like gold more valuable. But gold futures sold off further as stocks tumbled and the U.S. dollar gained. The Dow Jones Industrial Average (INDU 10,413, -190.60, -1.80%) was recently down 130 points at 10,473. The dollar index (DXY 78.65, +0.31, +0.39%) was 0.4% higher at 78.61. Chinese data released Thursday showed economic growth jumped 10.7% in the fourth quarter, putting the full-year figure above forecasts. Inflation surprised to the upside, suggesting recovery is continuing but fiscal and monetary policy may need to be tightened. Read more on Chinese economic data. "Markets continue to fret that China might hit the brakes too hard," said Benjamin Reitzes, an analyst at BMO Capital Markets, in a note. On Wednesday, gold slumped 2.4% along with global equity markets on a report that the China Banking Regulatory Commission had asked several commercial banks to stop issuing new loans for the rest of January. According to Reitzes, fears that China will tighten too much are "likely overdone." "Chinese officials did everything possible to jumpstart the economy; it's unlikely they're just going to reverse all that effort, as strong growth and job creation remain an important part of Chinese policy," he said. "The tightening will continue, but not enough to choke off the solid recovery."

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