By Pham-Duy Nguyen

Gold tumbled the most in almost six weeks as the dollar rallied, reducing the appeal of the precious metal as an alternative investment. Silver plunged more than 5 percent.

The dollar climbed as much as 0.8 percent against a weighted basket of the euro, yen and four other major currencies on speculation that the Federal Reserve may begin to raise U.S. borrowing costs this year to curb inflation. Crude oil dropped below $128 a barrel after reaching a record $135.09 on May 22.

“With the dollar stabilizing, gold could fall quite a bit,” said Matt Zeman, a metals trader at LaSalle Futures Group in Chicago. “There’s a lot of talk about inflation, which works both ways for gold. If the Fed does start tightening, that will strengthen the dollar and could really pop the commodity bubble.”

Gold futures for August delivery dropped $23.30, or 2.6 percent, to $881.70 an ounce on the Comex division of the New York Mercantile Exchange. The percentage drop was the biggest for a most-active contract since April 18. The metal fell for the third straight day. The price reached a record $1,033.90 on March 17.

Silver futures for July delivery plummeted 90 cents, or 5.2 percent, to $16.515 an ounce, the biggest drop since March 20.

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U.S. paper money discriminates against the blind and must be redesigned to help sight-impaired people distinguish among dollar bills, tens, twenties and other amounts, a federal appeals court ruled.

The U.S. Court of Appeals for the District of Columbia Circuit, in a 2-1 ruling today, rejected Treasury Secretary Henry Paulson’s contention that changing the bills to differentiate the denominations would be too expensive.

“A large majority of other currency systems have accommodated the visually impaired, and the secretary does not explain why U.S. currency should be any different,” Judge Judith Rogers wrote for the majority. “The financial costs identified by the secretary are not out of line with the costs of other currency changes the secretary has made”, she said.

U.S. District Judge James Robertson in Washington ruled in 2006 that the same-size paper currency violates the Rehabilitation Act of 1973, which prohibits discrimination based on disability. An inability to identify the value of paper money without help from others leaves blind and sight-impaired people at risk of being cheated, he said.

Of 180 countries that issue paper money, only the U.S. prints bills that are identical in size and, until recently, color for all denominations.

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Gold rose for the first time in four days in London as the dollar weakened against the euro, increasing the appeal of the metal as an alternative investment. Silver gained and platinum declined.

Gold has had a correlation of 0.67 to the euro-dollar exchange rate this year, up from 0.58 last year, Bloomberg data show. A figure of 1 would mean the two move in lockstep. The euro climbed for the first time in three days after the German economy grew at the fastest pace in 12 years.

Gold is tracking the gain in the euro “on the back of the German GDP numbers,” Mario Innecco, a futures broker at MF Global Ltd. in London, said today by telephone.

Gold for immediate delivery rose $1.82, or 0.2 percent, to $865.82 an ounce as of 12:36 p.m. in London. Prices have dropped 2.2 percent this week, compared with an advance of less than 0.1 percent in the UBS Bloomberg CMCI Index of 26 raw materials.

Futures for June delivery fell 50 cents to $866 on the Comex division of the New York Mercantile Exchange.

Gold “is likely to come under further pressure from speculators in the short-term following the increase in risk appetite and the view that inflation, for now, remains contained,” James Moore, an analyst at TheBullionDesk.com, said in a report.

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Feb. 27 (Bloomberg) — Gold rose to records in London and New York and silver gained to a 27-year high as the dollar’s all- time low spurred demand for precious metals as a hedge against inflation. Palladium rose to the highest since 2001.

Gold is up 15 percent this year as a U.S. housing slump and turmoil in credit markets led the Federal Reserve to lower interest rates when commodities were rising to records. The dollar declined on speculation Fed Chairman Ben S. Bernanke will signal more rate cuts in testimony to Congress today.

“With a weaker dollar, imports become more expensive and that can import inflation into a country,” said Ben Davies, chief executive officer of Hinde Capital Ltd. in London who helps manage the Hinde Gold Fund. “The Fed wants to inflate their way out of the problems of a huge deficit and a banking system that’s at the point of imploding.”

Gold for immediate delivery climbed $10.30, or 1.1 percent, to $958.45 an ounce as of 11:24 a.m. in London after earlier rising to a record $964.99. Read Full Story