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Gold dropped to a 5-1/2-month low on Friday and was set for a second week of declines, as the dollar soared after comments from the Federal Reserve bolstered expectations that U.S. interest rates would rise next month.

Investors continued their exit from exchange-traded funds backed by gold as assets fell for a fifth day, the longest stretch this year.

Fund holdings dropped 3.6 metric tons to 1,949.1 tons, the lowest since July, according to data compiled by Bloomberg as of Wednesday.

"Yellen's comments and a stronger dollar have pulled down the entire precious metals complex. Gold will be on a downtrend for now," said Brian Lan, managing director at Singapore-based gold dealer GoldSilver Central.

"People are speculating that Donald Trump's policies will improve companies and equity markets, and lots of them are going to stocks and currencies. Gold has lost a bit of its safe-haven asset status."

"The gold market seems to be fully accommodating a rate rise in December," HSBC analyst James Steel said in a note. "Gold prices are down sharply... This should help encourage emerging markets' demand. We expect this to cushion - but not necessarily reverse - the latest drop in prices."

Reference: Bloomberg, Reuters