* Bargain hunting seen after gold's sharp drop on Tuesday
* Market awaits Congress votes on $700 billion rescue plan
* Central Bank Gold Agreement seen at record low - WGC
(Recasts, updates with quotes, closing prices, market
activity)
By Frank Tang and Jan Harvey
NEW YORK/LONDON, Oct 1 (Reuters) - Gold rose on Wednesday
despite a sharply stronger dollar and crude oil losses, as
credit jitters boosted precious metals ahead of a key U.S.
Senate vote on a financial market bailout plan.
"If the government doesn't reach a bailout agreement, or if
the plan doesn't improve economic conditions here, gold will be
seen as a safe haven type of investment to hold on to during
times of panic," said Rob Kurzatkowski, futures analyst with
optionsXpress in Chicago.
U.S. stock markets opened sharply lower before paring
losses as traders awaited a Senate vote on a revised $700
billion bailout of Wall Street, which is expected to give fresh
direction to trade. []
Spot gold <XAU=> quoted at $876.20/879.20 an ounce at 2:26
p.m. EDT (1826 GMT), up 0.7 percent from gold's nominal Tuesday
close at $869.95.
"Yesterday's reaction in gold was overdone," said
Commerzbank analyst Eugen Weinberg. "We have really only taken
a couple of points back from the fall yesterday."
"Physical demand is so strong that it is surprising that
gold is still holding below $900 an ounce," he said. "One of
the things keeping it there is the stronger dollar."
The dollar rose against a basket of six currencies as
investors awaited the Senate vote. []
Gold is benefiting from ongoing uncertainty over the
outlook for the financial sector, rallying to a two-month high
of $920 an ounce earlier in the week after Washington initially
rejected the bailout plan.
However, prices eased as gold was caught up in a
commodities liquidation the following session.
If the package passes the Senate, it will put pressure on
the other branch of Congress, the House of Representatives, to
approve the project when it meets on Thursday.
U.S. gold for December delivery <GCZ8> settled up $6.50 at
$887.30 an ounce on the COMEX division of the New York
Mercantile Exchange.
CENTRAL BANK SALES, ETF DEMAND
In the official sector, sales of gold under the Central
Bank Gold Agreement (CBGA) in the year to Sept. 26 were
provisionally estimated at a record low 357.2 tonnes, the
industry-sponsored World Gold Council said on Wednesday.
Sales in the final year of the pact could be lower still,
the WGC added. Under the terms of the CBGA, signatories can
sell up to 500 tonnes of gold per year. []
Meanwhile, demand for bullion-backed exchange-traded funds
is strong as investors seek out gold as a haven from turmoil in
other markets.
The world's largest gold-backed ETF, the SPDR Gold Trust
<GLD>, said its holdings rose to a record 755.26 tonnes on
Tuesday, and are up 23 percent since Lehman Brothers filed for
bankruptcy protection on Sept. 15. []
Among other precious metals, silver <XAG=> tracked gold
higher and was at $12.51/12.61 an ounce, up 3.9 percent from
Tuesday's nominal close of $12.02. The metal is also benefiting
from strong ETF demand.
Spot platinum <XPT=> initially gave up early 3 percent
gains to fall back towards $1,000 an ounce, the level at which
it traded late in New York on Tuesday. The metal slipped to its
lowest level since February 2006 in that session.
It later recovered to trade at $1,023.00/1,043.00.
"Concerns about global economic growth continue, and thus a
slowdown in vehicle sales has weighed upon platinum," said
Barclays Capital in a note.
Platinum's sister metal palladium <XPD=> climbed to
$203.50/213.50 an ounce from its Tuesday close of $194.50.
