The long hitting Swede carded six birdies and one eagle to move from four back as the day began into a two-shot lead at 12-under-par. Kim, who shot 64 on Thursday to grab the first-round lead, posted a 2-under-par 70 to move to 10-under for the tournament. The South Korean's lone mistake came on the first hole, her 10th of the day, where she three-putted for a double bogey.
Brandie Burton, who finished fifth at last week's YourLife Vitamins LPGA Classic, is in solo third place at 8-under following a second-round 69.
Six players are tie for fourth place at 7-under - Dottie Pepper (69), Meg Mallon (69), Pat Hurst (69), Heather Bowie (70), Jean Bartholomew (70) and Laura Diaz (70).
Karrie Webb (70), Beth Daniel (70) and defending champion Nancy Scranton (69) are among a group six off the pace, tied for 10th place.
With the breeze blowing in round two, only 42 players broke par at The Club at The Strand - down from 85 in the first round.
Gustafson began her second round with a pair of pars and then proceeded to torch the front nine. A two-time winner on Tour a year ago, the 27-year-old birdied the third, fourth, sixth, seventh and eighth holes. Only one of those birdies required a conversion of more than 10 feet.
At the par-5 11th, Gustafson took advantage of her length, hitting the green in two with an eight-iron. She then rolled in the 12-foot eagle putt to move to 11-under for the tournament. Her final birdie came courtesy of a 30-foot bomb at the par-4 13th.
Gustafson is coming off a banner season, in which she won the Chick-fil-A Charity Championship hosted by Nancy Lopez and the Weetabix Women's British Open. She also earned two-and-a-half points for the victorious European Solheim Cup Team.
Ranking sixth on Tour in driving distance in 2000, averaging 257 yards a pop, Gustafson says she welcomes the brisk conditions.
'It felt pretty comfortable for me. I like playing in the wind. It's more fun,' Gustafson said.
Kim was having fun on Friday until she made the turn. Three-under for her round and leading the tournament, Kim was forced to take a penalty stroke when her second to the par-5 1st hit a tree and landed in the marsh. Following a drop, she reached the green on her fourth shot, but three-putted for a double-bogey 7.
Thursday, putting proved to be Kim's best ally. Friday, it was her foe.
'I missed three short putts today, so I need to practice putting after this interview,' Kim told the media following her round.
'Last year, the greens were in better condition. This year, the greens have a lot of brown in them, so I think the ball will go fast, but I hit it and the ball goes slow.'
Despite her frustrations on the greens, as well as with the windy weather, the 5'1' Kim recorded four birdies to offset the double bogey. Her second-round 70 has the three-time LPGA winner at 10-under-par, just two back of Gustafson.
'I want to follow the lead instead of being the leader. We have two more days to go,' said Kim.
The cutline fell at even-par 144. Seventy players made the cut including 17-year-old LPGA rookie Catherine Cartwright, who has carded rounds of 70-73.
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