* Investors buy into gold after $30 dip
* Market seen volatile ahead of Congress decision on TARP
* Platinum rebounds after sliding to 18-month low
(Recasts, updates, changes dateline, pvs SINGAPORE)
By Jan Harvey
LONDON, Oct 1 (Reuters) - Gold rose 1 percent in Europe on
Wednesday as a slightly softer dollar encouraged bargain hunting
after the previous session's more than $30 dip, with investors
seeking safety in the metal from economic turmoil.
The market is likely to remain volatile until the U.S.
Senate votes late on Wednesday on a $700 billion plan to bail
out beleagured financial institutions, which should lend fresh
direction to trade, analysts said.
Spot gold <XAU=> was quoted at $877.95/879.95 at 0926 GMT,
up from $869.95 late in New York on Tuesday.
Simon Weeks, head of precious metals at the Bank of Nova
Scotia, said while gold has recovered, its progress has been
lacklustre given the strength of ETF buying and demand for safer
assets.
"We are not going to get any clear direction until Congress
has finally passed (the U.S. rescue plan), assuming it does," he
said. "At the moment, gold is still vulnerable to headline news
items."
The yellow metal is correcting from a 3.5 percent dip in
prices on Tuesday, when gold was caught up in a broader
commodity liquidation on the back of the firming dollar.
A softening in the U.S. currency is encouraging buying. The
dollar dipped against the euro as dealers feared the previous
session's rise was overdone. []
The other main external driver of gold, crude oil, is also
climbing, which should be supportive. Oil rose on hopes that a
new version of a proposed U.S. financial rescue package will be
passed. []
RESCUE PLAN
The U.S. Senate will vote on a revamped version of the $700
billion rescue package proposed for Wall Street. []
If the package passes in 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.
"The fate of the Paulson rescue package remains the main
driver of commodity prices for the time being," said Dresdner
Kleinwort.
"Volatility in the metals markets might remain high until
the package has been approved by both houses of the U.S.
Congress."
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, rising to $12.30/12.38 an ounce from $12.02 late in New
York on Tuesday. The metal is also benefitting from strong ETF
demand.
Spot platinum <XPT=> climbed 3 percent to $1,030/1,050 from
$1,000 an ounce. The metal is rebounding after slipping to its
lowest level since February 2006 on Tuesday.
"With bargain hunters roaming, technical signals should
dominate today - and we expect some gains," said Manqoba
Madinane, an analyst at Standard Bank.
Its sister metal palladium <XPD=> climbed to $202/210 an
ounce from $194.50.
(Reporting by Jan Harvey; editing by Peter Blackburn)
