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By Bloomberg

Gold fell as the dollar held gains near the highest level in five years and investors reduced holdings in the largest exchange-traded product backed by the metal, curbing demand for a store of value. Silver rose.

Bullion for immediate delivery lost as much as 0.3 percent to $1,192.55 an ounce from the close on Dec. 26, and traded at $1,195.39 at 9:49 a.m. in Singapore, according to Bloomberg generic pricing. The metal advanced as much as 2.2 percent on Dec. 26 amid speculation that China, the biggest bullion consumer, will take more measures to bolster the economy.

Gold is headed for a second quarterly loss as prospects for higher borrowing costs from the Federal Reserve bolster the dollar. The Bloomberg Dollar Spot Index, which tracks the greenback against 10 currencies, traded near a five-year high today after rising for nine of the past 10 weeks. Holdings in SPDR Gold Trust dropped to the lowest level in six years on Dec. 26., and are set for a fifth consecutive monthly contraction.

“The recent strength in the dollar is exerting downward pressure on gold prices,” Sun Yonggang, a Shanghai-based macroeconomic strategist at Everbright Futures Co., said by phone. “The Fed is moving closer to raising rates. This doesn’t bode well for gold.”

Gold for February delivery retreated as much as 0.2 percent to $1,192.40 an ounce on the Comex in New York, and traded at $1,195.20. The trading volume for futures was 20 percent above the 100-day average for this time of day.

Silver for immediate delivery rose 1 percent to $16.2279 an ounce, extending a 2.2 percent climb on Dec. 26. Spot platinum lost 0.3 percent to $1,213.44 an ounce, while palladium traded at $817.55 an ounce from $818.19 on Dec. 26.