By Pham-Duy Nguyen Oct. 3 (Bloomberg) -- Gold fell, capping the biggest weekly decline since August, as the dollar rose, reducing the appeal of the precious metal as an alternative investment. Silver advanced. The dollar has risen 4.3 percent this week against a weighted basket of six major currencies. The U.S. Congress approved a $700 billion plan to rescue ailing banks. Gold gained 5.5 percent last month as Lehman Brothers Holdings Inc. collapsed and the U.S. government took over American International Group Inc., Fannie Mae and Freddie Mac. ``Gold is looking at dollar strength,'' said Frank Lesh, a trader at FuturePath Trading LLC Chicago. ``The approval of the bailout package is dollar-friendly and equity-friendly and holds gold back.'' Gold futures for December delivery fell $11.10, or 1.3 percent, to $833.20 an ounce on the Comex division of the New York Mercantile Exchange. The metal is down 6.2 percent this week, the most since the week that ended Aug. 15. Silver futures for December delivery rose 20.5 cents, or 1.8 percent, to $11.325 an ounce. The metal dropped 13 percent yesterday and 30 percent in the third quarter. ``Yesterday's plunge in silver was absolutely too much,'' said Frank McGhee, head dealer at Integrated Brokerage Services LLC in Chicago. Precious metals have declined this week as investors sold holdings to cover losses in other markets, McGhee said. `Massive Asset Liquidation' ``There's been massive asset liquidation from hedge funds and long-term holders who needed to raise cash,'' McGhee said. ``Gold is doing what it should do as a store of value -- gold has held its value against other assets.'' Gold may still rally following the U.S. House vote on the bailout plan, said James Turk, founder of Goldmoney.com, which held $405 million of gold and silver in storage for investors at the end of September. ``Gold has not lost its safe-haven status because there is no counterparty risk when you own gold,'' Turk said. ``The bailout plan accomplishes little because it does not address the underlying issue, which is solvency.'' Investment in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, reached a record 755.3 metric tons on September 30. The dollar index and the Standard & Poor's 500 Index pared gains after the bailout plan was passed. ``It's one of those buy-the-rumor, sell-the-news trades,'' Lesh said. ``The fact is that housing is still horrible and the economy is getting worse. We've lost the support of large commodity index buyers and commodities are under pressure. They're not buying gold.'' To contact the reporter on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net.

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