Gold Falls as Investors Weigh Expansion of U.S. Rescue Package

By Feiwen Rong

Sept. 22 (Bloomberg) -- Gold fell in Asia as investors tried to gauge the impact of an enlarged rescue package for the U.S. finance industry on the dollar and the world's biggest economy.

Gold had the biggest weekly advance last week in almost nine years as the worst crisis facing the U.S. finance industry since the 1920s pushed investors toward precious metals and oil. The Bush administration yesterday widened the scope of a $700 billion rescue package to include not just mortgage-related securities.

``The gold price traded through a wide range,'' David Moore, commodity strategist at Commonwealth Bank of Australia in Sydney, said in a report today. ``Shifting perceptions of the economic outlook and the U.S. financial system stresses'' are pushing commodity prices around today, he said.

Gold for immediate delivery fell 0.7 percent to $867.63 an ounce at 10:15 a.m. in Singapore. It fell as low as $862.80 having earlier gained much as 1.2 percent to $883.22. Bullion rallied more than 14 percent last week, the most since October 1999. Silver for immediate delivery rose 0.1 percent to $12.64 an ounce.

The U.S. plan would purge banks of devalued mortgage-linked assets, after earlier efforts failed to revive financial and housing markets. The government took over American International Group Inc., Fannie Mae and Freddie Mac in the past two weeks, as Lehman Brothers Holdings Inc. filed for bankruptcy and Americans withdrew a record $89.2 billion from money-market funds.

Asian stocks advanced today for the second day as the MSCI Asia Pacific Index jumped 2.4 percent to 116.94, extending a 5.5 percent gain on Sept. 19.

December-delivery gold gained 0.9 percent to $872.70 an ounce in after-hours electronic trading on the Comex division of the New York Mercantile Exchange.

Gold for August delivery jumped 3.6 percent to 2,949 yen a gram ($859 an ounce) on the Tokyo Commodity Exchange at the 11 a.m. local time break.

To contact the reporter on this story: Feiwen Rong in Singapore at frong2@bloomberg.net