Long-term bullish

Some analysts said that in the long term, the government plan is bullish to gold prices as it could pressure the dollar.

"The long-term implications of the proposal, if it is passed, are extremely negative for the dollar and therefore extremely positive for gold," said Grant.

Also on Thursday, the European Central Bank Thursday left its key lending rate unchanged at 4.25% despite a rapidly deteriorating economic outlook and rising turmoil in the European banking sector.

Gold prices have been very volatile recently as investors awaited Congress's decision on the rescue plan.

"Speculation about the bailout is the main short-term driving force," said Ed Bugos, editor of Gold & Options Trader, a newsletter published by Agora Financial. "Every time the market thinks it will go through, gold falls, and vice versa when the market thinks it will not be passed."

Some analysts said that even if the plan is passed, the U.S. economy is still going to succumb to a recession.

"Bailout or no bailout, gold is going higher in price as no matter what size the bailout is, it will not prevent a probable recession in the U.S.," said Mark O'Byrne, executive director at Gold & Silver Investments.

Investors have been snapped up gold coins as a safe haven as the financial crisis on Wall Street deepened