Reuters

Singapore, Sep 23: Gold dropped below $900 an ounce on Tuesday after early buying which propelled the price to a seven-week high lost steam, but uncertainties over the US government's bailout plan may offer support.

Platinum was off two-weeks high after posting the biggest one-day percentage gain in at least 23 years on Monday, while silver firmed to its highest level in three weeks, before losing some of the gains to profit taking.

Gold was trading at $895.00 an ounce, down $5.20 an ounce or 0.6 percent from New York's notional close on Monday, having hit an intraday high of $908.80 an ounce -- its highest level since early August.

"I think the next two to three days will be very telling," said Darren Heathcote of Investec Australia in Sydney. "There's potential in the days ahead we might go back below $900, but one would expect we are going to get a lot of support probably in the $870 to $880s. Likewise, we may find resistance pushing through about $930 at the moment," he said, referring to a level last seen in July.

Gold last hovered around $870 and $880 in August. The euro eased to $1,4784 but held near a one-month high struck on Monday when it posted its biggest one-day gain since 1999 on fears a $700 billion bailout for the financial sector may not resuscitate the economy.

In theory, a weaker dollar boosts gold's appeal as an alternative investment to currencies, stock markets and bonds. Despite gold's gains, dealers remained cautious, with the metal already moving in a wide range since tumbling to an 11-month low of $736 an ounce two weeks ago.

Gold is way below a lifetime high of $1,030.80 hit in March. "I think it's more towards speculative than safe haven buying. If we are talking about safe-haven buying, I guess that already happened last week, when we saw the large gains in gold," said a dealer in Singapore.

Gold has benefited from a wave of risk aversion after US investment bank Lehman Brothers filed for bankruptcy protection. Last Wednesday, bullion saw the largest one-day dollar price rise in history. Platinum hit a high of $1,255.50 an ounce, its highest since Sept. 9, before easing to $1,235.00 an ounce, down $9.50 or 0.768 per cent from New York's notional close.

Platinum posted its biggest one-day percentage gains on Monday to track rises in gold. "I guess it's a bit of spillover strength in gold on platinum. Judging by how much gold has gained in the previous week, platinum is still a bit behind," said the Singapore dealer.

"For platinum, I am looking at the $1,296.50 region for resistance, while support will come in at $1,164.50," said the dealer, referring to levels last seen in 2007.

Platinum hit a 2-1/2-year low at $1,042 last week as slowing US economy and poor car sales forced automakers to slash their production plans.

Platinum is mainly used in autocatalysts. Dealers said automakers were on the sidelines, suggesting the gains were mainly driven by speculative buying. Gold futures for December delivery on the COMEX division of the New York Mercantile Exchange fell $7.7 an ounce to $901.3 an ounce. Precious metals prices at 0530 GMT Metal Last Change Pct chg YTD pct chg Turnover Spot Gold 895.00 -5.20 -0.58 7.48 Spot Silver 13.39 -0.01 -0.07 -9.34 Spot Platinum 1235.00 -9.50 -0.76 -18.75 Spot Palladium 253.00 -0.50 -0.20 -31.25 Euro/Dollar 1.4788 Dollar/Yen 105.35