May 14 (Bloomberg) -- Gold rose in Asia for a second day as investors speculated that last week's sell-off may have been overdone and the dollar fell, boosting the appeal of the precious metal as an alternative asset. Silver was little changed.

Gold fell 2.6 percent last week, its biggest weekly decline for 10 weeks, as the dollar strengthened from near an all-time low against the euro. Gold often moves in the opposite direction of the dollar, which fell late in New York on Friday.

``The recent move down was driven a lot by what was happening in the U.S. dollar. I suspect that is going to help to appease investors and there may have been a bit of buying this morning as a result of that,'' Darren Heathcote, head of trading at Investec Bank (Australia) Ltd., said by phone from Sydney.

Gold for immediate delivery rose as much as $3.22, or 0.5 percent, to $674.07 an ounce and traded at $673.93 at 3:22 p.m. Sydney time. Silver for immediate delivery fell 1 cent, or 0.1 percent, to $13.22 an ounce at 3:24 p.m. in Sydney.

In Japan, gold for delivery in April 2008 gained 27 yen, or 1 percent, to 2,630 yen a gram ($680 an ounce) at 3:24 p.m. Sydney time on the Tokyo Commodity Exchange.

``There will be some re-positioning possibly with a view to it going higher again,'' Heathcote said. ``Fundamentally it is still looking reasonably strong and we could move back up into the $680s again.''

Stronger Euro

The dollar fell against the euro on speculation European Central Bank officials tomorrow will signal borrowing costs will rise again after an expected increase in June. ECB President Jean-Claude Trichet last week kept rates at 3.75 percent and pledged ``strong vigilance,'' suggesting an increase in June.

The dollar, which dropped on May 11 as government reports showed signs of a slowdown in the U.S. economy, traded at $1.3548 per euro at 3:25 p.m. Sydney time. The dollar reached a record low of $1.3681 per euro on April 27.

Fourteen of the 31 traders, investors and analysts surveyed by Bloomberg from Sydney to Chicago on May 10 and May 11 advised buying gold on speculation the dollar will weaken against the euro. Five of the past six bear markets in the U.S. currency led to a higher gold price. The metal is up 5.6 percent this year while the dollar has fallen 2.5 percent against the euro.

Gold futures for June delivery rose as much as $3, or 0.5 percent, to $675.30 an ounce and traded at $675.20 at 3:25 p.m. Sydney time in electronic trading on the Comex division of the New York Mercantile Exchange.

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

To contact the reporter on this story: Jesse Riseborough in Melbourne at jriseborough@bloomberg.net

Last Updated: May 14, 2007 01:30 EDT