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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