SINGAPORE (BLOOMBERG) - Gold tumbled to the lowest level in more than five years as investors digested comments by Federal Reserve chair Janet Yellen which added to reasons to expect that US interest rates will rise gradually after a widely anticipated lift-off this month (December).

Bullion for immediate delivery dropped 0.7 per cent to US$1,046.44 (S$1478) an ounce, its lowest level since February 2010, according to Bloomberg generic pricing. The metal is heading for a third annual decline.

Ms Yellen said on Wednesday that waiting too long to end the era of near-zero interest rates could force the central bank to tighten too quickly, which would risk disrupting financial markets and the six-year expansion. Expectations of higher borrowing costs have cut the appeal of gold, pushing the metal down 12 per cent this year. The US dollar traded near the strongest in more than a decade.

"Yellen's speech reinforced market expectations regarding the December rate hike and was the driving force behind the weakness in the precious metals and broader commodities," Mr Jordan Eliseo, chief economist at trader Australian Bullion Co in Sydney, said by e-mail. "We see a rate hike as fully priced in, and wouldn't be surprised to see a relief rally in the metals."