April 29 (Bloomberg) -- Gold fell to the lowest in more than three months as the dollar climbed against the euro, eroding the appeal of precious metals and commodities as alternative investments. Silver also declined.

The dollar rose as much as 0.7 percent against the euro on speculation the Federal Reserve will signal a pause tomorrow after six interest-rate reductions. Before today, gold and commodities gained more than 30 percent in the past year, while the dollar slumped 13 percent against the euro.

``If, as we suspect, the Federal Reserve stands pat on rates, or signals that it is done for the time being, we could see the dollar strengthen, and lead to another bout of profit- talking in commodities,'' Edward Meir, an analyst at MF Global Ltd., said in a report.

Gold futures for June delivery fell $18.70, or 2.1 percent, to $876.80 an ounce on the Comex division of the New York Mercantile Exchange, the lowest closing price for floor trading since Jan. 7. The price earlier touched $873.60, the lowest for a most-active contract since Jan. 22.

``Gold is down on the assumption that the credit crises is over and the Federal Reserve is done cutting rates,'' said Ralph Preston, a futures analyst with HeritageWestFutures.com in San Diego.

The Fed reduced borrowing costs by 300 basis points to 2.25 percent from 5.25 percent in September, with the last cut on March 18. Gold reached a record $1,033.90 an ounce on March 17.

``If the Fed is not at the end of the easing cycle, it's near the end,'' said Jeff Gladstein, global head of foreign- exchange trading at AIG Financial Products in Wilton, Connecticut. ``I don't think the dollar will strengthen aggressively by any stretch, but I do think it's trying to bottom.''

Dollar Rises

The U.S. currency headed for its first monthly advance this year against the euro as traders increased bets the Fed will stop lowering bank-borrowing costs after cutting the benchmark federal funds rate by 25 basis points tomorrow.

The dollar rose 0.6 percent to $1.5564 per euro at 3:03 p.m. in New York, from $1.5657 yesterday. It touched $1.5541, the strongest level since April 3.

``Gold prices tripped and fell sharply on Tuesday, as anticipation about the Fed meeting's eventual results turned into apprehension that the massive slide in rates seen since September will not only come to an end shortly, but will likely be partially reversed after a period of no action,'' Jon Nadler, a senior analyst at Kitco Minerals & Metals Inc., wrote in a report.

Silver futures for July delivery declined 48.3 cents, or 2.8 percent, to $16.64 an ounce. Before today, the price gained 26 percent in the past year.

The Reuters/Jefferies CRB Index of 19 commodities dropped as much as 2.1 percent today.

The UBS Bloomberg Constant Maturity Commodity Index of 26 items fell 28.74, or 1.9 percent, to 1,508.24 at 3:53 p.m. in New York. A settlement at that level would mark the biggest drop since March 19 for the index.

To contact the reporter on this story: Halia Pavliva in New York at hpavliva@bloomberg.net.

Last Updated: April 29, 2008 15:57 EDT