Gold, Silver Futures Fall on Speculation Bailout Plan Will Pass

By Pham-Duy Nguyen

Oct. 2 (Bloomberg) -- Gold tumbled more than 3 percent on speculation the U.S. Congress will approve a plan to revive credit markets, reducing the appeal of the precious metal as a haven. Silver plunged more than 6 percent.

The dollar jumped as much as 1.8 percent against the euro after the Senate authorized the government to buy troubled assets from banks. The House of Representatives is set to vote on the measure tomorrow. Gold gained 5.5 percent in September as Lehman Brothers Holdings Inc. collapsed and the U.S. took over American International Group Inc., Fannie Mae and Freddie Mac.

``The dollar is up big on the Senate passing the bailout plan,'' said Matt Zeman, a metals trader at LaSalle Futures Group in Chicago. ``In terms of gold, there's a lot of optimism that this bill is going to pass in the House. The safe haven is gone, and gold definitely suffers if this thing is passed.''

Gold futures for December delivery fell $28.30, or 3.2 percent, to $859 an ounce at 9:13 a.m. on the Comex division of the New York Mercantile Exchange. Earlier, the price touched $853.50, the lowest since Sept. 19.

Silver futures for December delivery declined 83.5 cents, or 6.5 percent, to $11.935 an ounce.

Before today, gold was up 5.9 percent this year, while silver dropped 14 percent.

To contact the reporter on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net.