Gold fell sharply early Tuesday, reversing the multi-month highs hit overnight to trade below $885 an ounce as US stock markets bounced hard from Monday's record-breaking collapse – the worst one-day slide since Black Monday 1987.

Oil turned higher from this week's 12% loss so far, while the Dollar held steady vs. the Euro and Sterling on the currency market.

Short-term government bonds continued to rise, pushing the returns offered to new buyers lower, following the US Bail-Out Plan's failure to gain political approval – a move that apparently threatens what one academic calls "an economic 9/11."

A second bank in Belgium, Dexia, received a government bail-out – this time worth $9.2bn – as European shares slipped for the 15th session in 21 Sept. trading days.

"When the turbulence in the international markets does calm down," says the latest Precious Metals Monthly from Fortis group – the ailing Belgian bank half-nationalized on Monday – "Gold could fall back.

"But the high probability that any US bad debt rescue plan will be inflationary and negative for the US dollar should be very supportive."

Following the House defeat by 228 votes to 205, the planned bail-out is now being re-drawn by the Bush administration and senior US lawmakers.

"Our tool kit is substantial but insufficient," said US Treasury secretary Hank Paulson overnight, still demanding the $700bn in aid which a spokeswoman confessed to Forbes magazine last week "[was] not based on any particular data point.

"We just wanted to choose a really large number."

Last week, according to a poll by Rasmussen Reports, 44% of US citizens opposed the plan. A live poll now running on CNBC puts the nay-sayers at 49%, with only 43% of respondents in favor and 8% remaining "unsure".

"Most of the investment community are focusing on the financial crisis," said Marc Faber, the Swiss fund manager and Gloom, Boom & Doom author now based in Thailand, to the TV newswire last night.

"But what they should be focusing on is that earnings will continue to disappoint for a long time, and that global growth is going to go down substantially. Most economies already today are in recession."

Noting that the US Dollar should continue to find support as investors rush to try and re-pay their debts "I think gold will be a relatively good investment under any kind of scenario until the US government bans the ownership of Gold in the United States.

"They are very good at changing the rules of the game – now banning short sales [of financial and other US equities].

"So yes – physical gold, you should own. Not derivatives with Citigroup, J.P.Morgan, UBS and investment banks, but physical and outside the US." (Ready to start your offshore, physical Gold Investment today...?)

Tuesday morning saw the authorities in South Korea, Taiwan and Indonesia ban short-selling in a range of equities for up to two weeks after watching local stock markets lose up to a quarter of their value so far this year.

The Kospi index in Seoul still lost 0.6% today, while Taipei shares dropped 3.6%. Wall Street's S&P500 has now lost 12% – one-eighth of its value – since the US authorities banned short-selling of up to 900 financial and other "vulnerable" stocks.

"We believe the US government's actions to curb financial market systemic risks are necessary, but sadly insufficient to counteract the destabilizing effect of the credit market meltdown," says Walter de Wet, chief metals analyst at Standard Bank in Johannesburg.

"[There is] quantitative evidence of gold's role as a safe-haven in periods of financial market distress. We believe that, should systemic risk keep rising as rapidly, the gold price will stop slipping."