Gold in New York fell to the lowest since June after a rally above $600 failed to attract new buyers.

``People are selling rallies now,'' said Frank Lesh, a trader at FuturePath Trading LLC in Chicago. ``There are still some longs that have been trapped. The trade now is to sell gold and get short of this stuff.''

Gold has tumbled more than $50 in the past week as declining oil prices fueled speculation demand for raw materials may be easing. The Reuters-Jefferies CRB Index of 19 commodities touched the lowest since July 2005. Gold is down 20 percent from a 26-year high of $732 an ounce reached on May 12.

Gold futures for December delivery fell $10.30, or 1.7 percent, to $586 an ounce on the Comex division of the New York Mercantile Exchange, the lowest closing price since June 28. Prices earlier traded as high as $601.80. Today's decline was the sixth in seven sessions.

A futures contract is an obligation to buy or sell a commodity at a set price for delivery by a specific date.

Losses accelerated after gold fell below the 200-day moving average, a signal to traders who look at historical charts that prices are poised to fall.

``You have a flip in the market from net long to net short,'' said Michael Guido, director of hedge fund marketing at Societe Generale in New York. ``Speculators are starting to short the market.''

Oil Declines

A decline in oil helped send gold lower. Oil futures touched $63.15 today, the lowest since March 23. Prices are down 2.9 percent from a year ago after reaching a record high of $78.40 on July 14.

Gold and oil have generally moved in lockstep as investors buy the metal as a hedge against inflation when energy expenses climb. Oil erased earlier gains after the Energy Department said inventories are 11.7 percent higher than the five-year average.

``Crude has to do better than this to pull the metals up,'' Lesh of FuturePath said.

Gold may drop to $575 before rebounding, said Guido, of Societe Generale.

``The intention is to buy the market but investors want to see how low it can get,'' Guido said.

The lowest prices in more than two months may attract some buyers, analysts said. Gold may rise to $700 an ounce by the end of this year, GFMS Ltd., an independent London-based precious metals research company, said in a report today.

Net purchases of gold for investment totaled 165 tons in the first half, compared with net sales of 38 tons a year earlier, GFMS said. Jewelry demand, the biggest use for the metal, fell 28 percent to 1,069 tons. ``The worst of the decline may be over,'' said GFMS Executive Chairman Philip Klapwijk at a London conference today.

``I'm looking for a bounce from bargain hunters,'' said Leonard Kaplan, president of Prospector Asset Management. Lower prices have lured some of his clients back to the market, he said.