(Corrects closing price in fourth paragraph.)

July 29 (Bloomberg) -- Gold futures fell to a two-week low as the dollar’s rebound reduced the appeal of the precious metal as an alternative investment. Silver tumbled the most in six weeks.

The dollar headed for the biggest gain in five weeks against a basket of six major currencies. The greenback climbed partly on demand for a haven amid slumping equities in China. Yesterday, gold dropped 1.5 percent and silver fell 1.8 percent.

“The key driver is very much now the currency movement,” said Suki Cooper, an analyst at Barclays Capital in London.

Gold futures for December delivery fell $12, or 1.3 percent, to $929.70 an ounce on the Comex division of the New York Mercantile Exchange. Earlier, the contract touched $927.60, the lowest since July 15.

Gold for immediate delivery dropped $8.50, or 0.9 percent, to $929 at 3:23 p.m. New York time.

Silver futures for September delivery dropped 48.2 cents, or 3.5 percent, to $13.258 an ounce on the Comex, the biggest drop since June 15.

“The dollar remains in the spotlight, and as it strengthens, so drop the precious metals,” Miguel Perez- Santalla, a Heraeus Precious Metals Management sales vice president in New York, said in a note.

Demand for gold may pick up in September, before the Indian wedding season begins in October, Cooper of Barclays said. India is the world’s largest consumer of the precious metal.

‘Last Bounce’

“Having taken out supports at $948 and at $942, bullion is tasked with proving that it can attract supporters at just about this level, lest it should ease back toward the previous $905 price, from which it did manage the last bounce,” Jon Nadler, a Kitco Inc. senior analyst in Montreal, said in a report.

Yesterday, holdings in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, fell 3.36 metric tons to 1,083.25 tons, the lowest since March 17.

“Leakage continues to be manifest in the gold ETF,” Nadler said. “In some respects, risk appetite translates into a lessened appetite for holding the asset of last resort.”

Gold futures have climbed 4.9 percent this year, and silver is up 17 percent.

To contact the reporter on this story: Halia Pavliva in New York at hpavliva@bloomberg.net; Chanyaporn Chanjaroen in London at cchanjroen@bloomberg.net

Last Updated: July 29, 2009 17:52 EDT