Gold Rises for 2nd Day as Some Investors See Fall as Overdone

May 26 -- Gold rose for a second day in Asia as some investors judged that the metal's fall to a one-month low this week was overdone. Slower-than-forecast growth in the U.S. added to the appeal of the precious metal.

Gold for immediate delivery is down 11 percent since reaching a 26-year high of $730.40 an ounce on May 12, on concern a five-year rally may be over. Last week's decline of 8 percent was the biggest since 1990. The lower price made gold more attractive, traders said.

``The recent fall seems excessive,'' said Ian Hwang, deputy general manager at Korea Exchange Bank Futures Co.'s international business team in Seoul. ``Economic growth in the U.S. missed forecasts, weakening the U.S. dollar. There's still continuous demand for commodities.''

Gold for immediate delivery rose $2.50, or 0.4 percent, to $653.40 at 2:25 p.m. Seoul time, after gaining $10.20, or 1.6 percent, yesterday. Gold for June delivery rose 0.7 percent to $653 an ounce in after-hours electronic trade on the Comex division of the New York Mercantile Exchange.

U.S. economic growth rose at an annual rate of 5.3 percent in the first quarter, the Commerce Department said yesterday. That's slower than the median forecast of 5.8 percent in a Bloomberg News survey, reflecting less momentum in consumer and corporate spending.

Still, last quarter's figure was the biggest since the third quarter of 2003 and compares with a 4.8 percent rate that was reported on April 28.

Spot gold may rise to $660 today as other metals and oil prices gain, Hwang said. The prices ``move as a package.''

Uranium Enrichment

Crude oil rose above $71 a barrel for a second day in New York, partly because talks to convince Iran to abandon uranium enrichment ended inconclusively.

Crude oil for July delivery was at $71.55 a barrel, up 23 cents, in after-hours electronic trading on the New York Mercantile Exchange at 2:21 p.m. Seoul time. Prices today are 40 percent higher than a year ago.

Iranian President Mahmoud Ahmadinejad said May 24 his country has the right to develop atomic energy and any aggressors trying to stop it would get a `` historic slap.'' Iran is the world's fourth- largest oil producer.

The stalemate over Iran prompted investors seeking a haven to buy gold. Gold rose to a record $850 an ounce in January 1980 when the 1979 Iranian revolution cut oil exports.

``We are looking for prices to go up amid concerns about security and oil prices,'' Ali Alwash, a Geneva-based trader at MKS Finance SA, a precious metals-trading and refining company, said yesterday. ``The geopolitical situation could be aggravated.''

In India, the world's biggest consumer, gold prices for June delivery rose 58 rupees, or 0.6 percent, to 9,732 rupees per 10 grams, or 30,266 rupees ($660) per ounce, at 11:32 a.m. on the Multi Commodity Exchange of India Ltd. in Mumbai.