NEW YORK (MarketWatch) - Gold fell more than 3% Thursday as the U.S. Senate's approval of a revised $700 billion bailout plan boosted the dollar, reducing dollar-denominated prices of the precious metal.
Gold for December delivery lost $27.80, or 3.1%, to $859.50 an ounce on the Comex division of the New York Mercantile Exchange.
"In short term gold is likely to remain in a softer mood as approval of the U.S. rescue package will no doubt boost the dollar and investor risk appetite," said James Moore, an analyst at TheBullionDesk.com.
The Senate approved the revised plan on Wednesday night to stabilize the financial industry, just two days after the House of Representatives rejected the original package.
By a vote of 74-25, senators authorized the Treasury Secretary to buy bad assets from companies' books, allowed the Federal Deposit Insurance Corp. to raise its deposit-insurance cap to $250,000 from $100,000, extended several tax breaks and required government agencies to modify troubled mortgages.
The measure now moves to the House, where a vote is expected on Friday. See full story.
"The passage of the U.S. financial rescue package in the Senate did contribute to the firmer dollar tone," said Marc Chandler, a currency analyst at Brown Brothers Harriman.
The dollar rose against the euro, with the European currency standing at $1.3782, down from $1.4007 in late Wednesday trading. The greenback was also higher against the British pound. The dollar index , which tracks the value of the greenback against other major currencies, rose 1.2%. See Currencies.
A rising dollar pressures gold prices as it reduces gold's appeal as an investment alternative.
Also on Thursday, the European Central Bank Thursday left its key lending rate unchanged at 4.25% despite a rapidly deteriorating economic outlook and rising turmoil in the European banking sector.
Gold prices have been very volatile recently as investors awaited Congress's decision on the rescue plan. Some analysts said that even the plan is passed, the U.S. economy is still going to succumb to a recession.
"Bailout or no bailout, gold is going higher in price as no matter what size the bailout is, it will not prevent a probable recession in the U.S.," said Mark O'Byrne, executive director at Gold & Silver Investments.
Investors have been snapped up gold coins as a safe haven as the financial crisis on Wall Street deepened. See related story.
Also on Thursday trading, platinum for October delivery lost 3.3% to $995.60 an ounce, falling below the $1000 level for the first time since early 2006.
December palladium slid 3.3% to $204.05 an ounce and December silver dropped 6.4% to $11.95 an ounce. December copper skidded 0.9% to $2.77 a pound.
In spot trading, the London gold-fixing price, used as a benchmark for gold for immediate delivery, stood at $866.25 an ounce Thursday morning, down $13.75 from Wednesday afternoon.