Gold Falls for 4th Straight Session on Speculation Rally Ends

May 22 (Bloomberg) -- Gold prices fell for the fourth straight session on speculation that a five-year rally in precious metals may be over.

Spot gold last week dropped 8 percent, the most since 1983, after surging 32 percent in the previous nine weeks. The metal reached a 26-year high of $730.40 an ounce on May 12. Gold may decline further over the next few months before resuming the long- term rally, some analysts said.

``The sell-off hasn't finished yet,'' said Alan Mandel, head trader at Alan M Trading Co. in New York. ``I wouldn't be surprised to see it go under $600, and then stay there a while before there's a resumption of another dramatic move higher.''

Gold for immediate delivery declined $6.10, or 0.9 percent, to $651.50 an ounce at 11:52 a.m. New York time. Prices earlier tumbled more than $20 to $637.55. Before today, the metal had gained 56 percent in the past year.

Futures for June delivery on the Comex division of the New York Mercantile Exchange fell $6, or 0.9 percent, to $651.50. A futures contract is an obligation to buy or sell a commodity at a set price for delivery by a specific date.

Gold may drop to $575, said Tom O'Brien, editor of the Gold Report. ``Gold wants to build another floor like the floor we had for two and half years, but then it will go higher,'' O'Brien said.

The metal may lose its appeal as a hedge against inflation as the U.S. Federal Reserve signals it will continue to raise interest rates and oil trades below $70 a barrel.

``Gold traders see the Fed acting more aggressively to contain the price pressures,'' said John Person, an analyst at NationalFutures.com in Palm Beach, Florida. ``Higher rates may help contain inflation. Gold would certainly lose its attractiveness as a hedge against the perception of higher inflationary pressures.''

Stronger Dollar

A stronger dollar helped pushed metal prices lower. Gold traditionally moves in the opposite direction of the U.S. currency. During gold's nine-week climb, the dollar traded at a one-year low against the euro.

``The dollar's resurgence is certainly a contributing factor'' to gold's decline, said Jim Pogoda, an investor in Summit, New Jersey, and a former precious-metals trader for Mitsubishi International Corp. ``I'll stay bearish.''

Half of the 36 traders, investors and analysts surveyed by Bloomberg News from Sydney to Chicago on May 18 and May 19 advised selling gold. Fourteen recommended buying, and four were neutral.

Spot silver declined 14 cents, or 1.1 percent, to $12.43 an ounce after touching $11.97. The metal plunged 13 percent last week. Futures for July delivery were unchanged at $12.36 on the Comex.