June 10 (Bloomberg) -- Gold fell the most in a week as the dollar climbed for the second straight day, reducing the appeal of the precious metal as an alternative investment. Silver also dropped.

The dollar reached a three-month high against the yen and rose against the euro after Federal Reserve Chairman Ben S. Bernanke said risks to the economy have faded, spurring speculation that interest rates will rise. Before today, gold climbed 38 percent in the past year as the dollar fell 15 percent against the euro.

``The Fed has shifted their concern from economic weakness to talking about fighting inflation,'' said Frank Lesh, a trader at FuturePath Trading LLC in Chicago. ``Ultimately, gold is an international currency, and its biggest influence is still the dollar.''

Gold futures for August delivery declined $11.10, or 1.2 percent, to $887 an ounce at 9:11 a.m. on the Comex division of the New York Mercantile Exchange. A close at that price would mark the biggest percentage drop since June 3.

Silver futures for July delivery fell 5 cents, or 0.3 percent, to $17.16 an ounce. Before today, the price advanced 15 percent this year, while gold climbed 7.2 percent.

To contact the reporter on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net.

Last Updated: June 10, 2008 09:12 EDT