Gold Falls on Speculation Rally Was Overdone; Silver Declines

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"Gold is the safest haven of all. Gold will continue to benefit from all the monetary turmoil and worries about insolvent banks."

Gold fell for the first time in three sessions as some investors sold the metal after a rally to the highest price since July. Silver also declined.

The seven-day relative strength index for gold futures topped 70 on Jan. 30, a signal that prices may drop in the near term. Gold gained 5% last month, driving investment in the SPDR Gold Trust, the biggest exchange-traded fund, or ETF, backed by bullion, to a record 843.6 metric tons on Jan. 29.

"Gold is overextended to the upside and we've sold some calls against our gold ETF," said Dennis Gartman, an economist and editor of the Gartman Letter in Suffolk, Virginia. "There is growing interest in gold and we remain bullish of it. We were a bit concerned at the overbought nature of the market."

Gold futures for April delivery fell $11.30, or 1.2%, to $917.10 an ounce at 12:17 p.m. on the New York Mercantile Exchange's Comex division. The contract gained 4.3% in the previous two sessions to settle at $928.40 on Jan. 30. The most-active contract last closed higher on July 28.

Silver futures for March delivery slid 6 cents, or 0.5%, to $12.505 an ounce. The metal slumped 24% in 2008 while gold gained 5.5%.

Investment in Barclays Plc's IShares Silver Trust, the biggest ETF backed by silver, also rose to a record last week, topping 7,453.2 metric tons on Jan. 27.

Still, a drop in prices may be a buying opportunity for investors seeking a store of value in precious metals, analysts said. The Standard & Poor's 500 Index fell 8.6% last month, the steepest January decline on record, while the Reuters/Jefferies CRB Index of 19 raw materials lost 4%.

"The search for safe havens is still a major factor driving investor decisions," said James Turk, founder of Goldmoney.com, which held $548 million in gold and silver for investors at the end of January. "Gold is the safest haven of all. Gold will continue to benefit from all the monetary turmoil and worries about insolvent banks."

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