Gold Oversold?

Gold declines after rally

Gold had its biggest weekly drop in 23 years and silver fell as the dollar rallied, damping demand for precious metals as an alternative investment. The slump led a plunge in commodities and shares of mining companies.

Gold, after reaching a 26-year high of $730.40 an ounce on May 12, has since dropped 7.7 percent in London, the first drop since the week ending March 10. The decline may signal an end to a rally in metals that included a doubling of copper prices in the past year to a record $8,800 a metric ton this month.

''You're just running out of new buyers,'' said Michael Guido, director of hedge fund marketing and commodity strategy at Societe Generale in New York. ``They're not getting long on gold at $700. Copper at $8,200 in London just seems a little too rich. Everyone wants to see a pullback because they want to get back into the market.''

Gold for immediate delivery dropped $22.30, or 3.3 percent, to $659.60 an ounce in London. On the Comex division of the New York Mercantile Exchange, gold futures for delivery in June fell $23.20, or 3.4 percent, to $657.50.