Gold Heads for Second Weekly Increase as Rescue Talks Continue

By Glenys Sim

Sept. 26 (Bloomberg) -- Gold rose, heading for a second weekly gain, as the dollar fell amid ongoing negotiations on a $700 billion bailout of financial institutions that would use U.S. taxpayers' money to help revive credit markets.

Bullion has climbed 0.9 percent this week as the dollar lost 1.3 percent against the euro amid skepticism the plan could avert a recession. The collapse of Washington Mutual Inc., touted as the biggest bank failure in U.S. history, also kept gold supported.

``There's still a lot of uncertainty out there and with many Asian markets out in turns next week, there's some risk aversion trade coming in,'' said Zhu Lv, research manager at Shanghai Tonglian Futures Co.

Bullion for immediate delivery gained as much as 0.7 percent to $883.90 an ounce, and traded at $878.74 an ounce at 9:48 a.m. in Singapore. Silver for immediate delivery was up 1 percent at $13.34 an ounce.

Markets in China, the world's largest gold consumer after India, are closed next week for the National Day holiday.

``Gold may meet some resistance at the $900-$920 level because these haven investors are usually buying on panic, not as a longer-term investment,'' said Zhu.

The dollar headed for a second weekly decline against the yen and was on course for a weekly loss against the euro, as the Treasury's asset-purchase proposal hit a snag after a group of Republicans offered a different solution.

Gold for December delivery added 0.2 percent to $884 an ounce in after-hours electronic trading on the Comex division of the New York Mercantile Exchange, and gold for June delivery on the Tokyo Commodity Exchange fell 1.3 percent to 2,994 yen a gram ($879 an ounce) at 9.49 a.m. Singapore time.

To contact the reporter on this story: Glenys Sim in Singapore at gsim4@bloomberg.net