NEW YORK (MarketWatch) -- Gold futures rose more than 5% Monday to end above $900 an ounce for the first time in seven weeks, as a massive government plan to rescue the financial sector pressured the U.S. dollar, increasing the metal's appeal as an alternative investment.

Gold for December delivery rose $44.30, or 5.1%, to close at $909 an ounce on the Comex division of the New York Mercantile Exchange, ending above $900 for the fist time since Aug. 4. Other precious metals also moved higher.

"The rally was sparked by a proposal that the government would create a massive reserve fund designed to soak up to $700 billion of mortgage instruments," said Edward Meir, a commodities analyst at futures brokerage MF Global.

The Bush administration proposed a plan over the weekend that would allow the government to buy the bad debt of U.S. financial institutions for the next two years. It gives the Treasury secretary authority to buy $700 billion in mortgage-related assets, and would raise the statutory limit on the national debt from $10.6 trillion to $11.3 trillion. See full story.

The plan "has been largely dollar negative," said James Hughes, analyst at CMC Markets, as a higher debt will endanger the dollar's global position as a dominant currency.

The dollar was trading lower against the euro, the British pound and the Japanese yen. The dollar index DXY, +0.07% , a measure of the greenback against a trade-weighted basket of currencies, dropped 1.9%. A weakening greenback tends to push up dollar-denominated gold prices. See Currencies.

"Commodity prices have risen quite sharply as the dollar has weakened, and we do not think that is a one-day rebound," said Dennis Gartman, author of commodities newsletter the Gartman Letter.

The government's plan is "inordinately inflationary and are highly supportive of commodity prices," he added.

More government debt will also likely weigh on the price of government bonds. Treasury prices fell by the most in two decades on Friday, as investors sold in anticipation of new supply coming on the market.

International investors may respond to the prospect of holding U.S.-denominated paper in the face of expanding supply by turning to assets such as gold and other commodities, analysts at Bank of New York Mellon said.

Indeed, most commodities moved higher Monday, with the benchmark crude-oil contract rallying more than $16 to close at $120.92 a barrel. See Futures Movers. The Reuters/Jefferies CRB Index CRB, -1.01% , a benchmark gauging the prices of major commodities, rose 3.9%.

Gold had seen dramatic changes in prices last week. The December contract surged $70 on Wednesday, the biggest daily gain in dollar terms. But it slumped as much as 7.6% on Friday, the biggest percentage loss in 25 years.

Gold ended the week up 13%, the biggest weekly gain in nine years. Some analysts said gold could rise further as its appeal as an investment safe haven will strengthen.

In other metals, December silver surged 7.8% to $13.45 an ounce, October platinum rallied 7.5% to $1,235.80 and December palladium surged 7.9% to $255.75 an ounce. Copper for December delivery added 2.6% to $3.26 a pound.

In spot trading, the London gold fixing price 38099902, used as a benchmark for gold for immediate delivery, stood at $889 an ounce Monday afternoon, up $20 from Friday afternoon.

On the equities side, the Amex Gold Bugs Index HUI, jumped 9.4% to 354.13 points.