UPDATE 3-Gold rises on oil, cool towards U.S. Senate vote

* Gold ticks higher on firmer oil, shrugs off bailout vote

* Oil rises more than $1

* Light buying by jewellers and some scrap sales
(Updates prices, adds activity in physical sector)

By Lewa Pardomuan

SINGAPORE, Oct 2 (Reuters) - Gold advanced to track higher
oil prices on Thursday, with investors already factoring in a
$700 billion bailout plan passed by the U.S. Senate to rescue
distressed banks.
Short-covering also lifted gold as Asian stocks and the dollar
reversed early gains after the U.S. Senate approved the
bailout, which the White House and lawmakers said would help
avert global economic chaos.

Gold XAU= traded at $872.15 an ounce, up $3.40 from New
York's notional close on Wednesday, having hit an intraday low
of $864.65 an ounce.

"There's a little bit of short covering. I think we have to
wait for two more days because the other one has to pass it. I
think people are still nervous," said Ronald Leung, director of
Lee Cheong Gold Dealers in Hong Kong.

The Senate voted 74-25 for the bill that includes a package
of tax breaks for businesses, energy and an increase in bank
deposit insurance. The measure now goes to the U.S. House of
Representatives for a vote that is likely on Friday.
[ID:nL1596334]

"If we close below $860, I think there's a chance for gold
to visit the lower end. On the upside, $920 will cap the
market," said Leung, referring to a higher level last seen on
Monday.

Gold has bounced as much as 25 percent since tumbling to an
11-month low of $736 an ounce on Sept. 11 as uncertainties in
the bailout package to alleviate the financial crisis triggered
safe-haven buying.

The metal is still well below a record high of $1,030.80
struck in March.

In the physical market, dealers reported buying from
jewellers but there were also sales of scrap following gold's
rise to a two-month high above $900 this week. Premiums for
gold bars were unchanged at $1 to spot London prices
<GOLD/ASIA1>

"There's light buying but as prices get higher, some people
start to sell. Vietnam is selling but I guess everyone thinks
it's still not clear what's going to happen next despite the
bailout," said a dealer in Singapore.

In other markets, the dollar index, a gauge of its
performance against six major currencies, was up 0.2 percent at
79.845 .DXY but touched a session low of 79.645 after the
Senate vote. [USD/]

Oil's rise to around $100 a barrel helped gold defy the
dollar's early gains. [O/R]

The MSCI index of Asia-Pacific stocks outside Japan
.MIAPJ0000PUS fell 0.7 percent, erasing a modest gain
immediately before the U.S. Senate vote, while Tokyo's Nikkei
average .N225 fell 1.1 percent.

The world's largest gold-backed ETF, the SPDR Gold Trust
(GLD: Quote, Profile, Research), 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. [ID:nSP7315]

New York gold futures GCZ8 fell $10.2 to $877.1 an ounce.

Sales of gold under the Central Bank Gold Agreement in the
year to Sept. 26 were provisionally estimated at a record low
of 357.2 tonnes, the industry-sponsored World Gold Council said
on Wednesday. [ID:nL1162471]
Precious metals prices at 0417 GMT
Metal Last Change Pct chg YTD pct chg
Turnover
Spot Gold 872.15 3.40 +0.39 4.74
Spot Silver 12.40 -0.12 -0.96 -16.05
Spot Platinum 1030.50 10.50 +1.03 -32.20
Spot Palladium 205.00 3.50 +1.74 -44.29
TOCOM Gold 2967.00 -31.00 -1.03 -3.04
16277
TOCOM Platinum 3476.00 -45.00 -1.28 -34.89
8555
TOCOM Silver 421.00 1.40 +0.33 -22.18
575
TOCOM Palladium 720.00 11.00 +1.55 -46.71
255
Euro/Dollar 1.3984
Dollar/Yen 105.75
TOCOM prices in yen per gram, except TOCOM silver which is
priced in yen per 10 grams. Spot prices in $ per ounce.
(Editing by Ben Tan)