Sept. 18 (Bloomberg) -- Gold advanced for a second day, extending its biggest jump in 26 years, as investors sought a haven from the credit crisis that's sent equity markets tumbling. Silver also rose.

Gold gained as much as 3.4 percent to $892.93 an ounce after jumping 11 percent yesterday in the wake of the U.S. government's takeover of American International Group Inc. About $3.6 trillion of market value has been erased from global stocks this week as financial market turmoil intensified with the bankruptcy of Lehman Brothers Holdings Inc.

``The conditions are still supportive for gold and it's very possible to see gold over $1,000 again,'' said Wallace Ng, chief trader for precious metals in Asia-Pacific at Fortis Bank.

Gold for immediate was 0.8 percent higher at $870.65 an ounce at 1:53 p.m. in Singapore. The metal had earlier declined as much as 0.9 percent as oil fell, reducing its appeal as an inflation hedge, and as some investors sold the metal following yesterday's 11 percent jump, its biggest gain since Sept. 3, 1982. Silver was unchanged at $11.96 an ounce.

``After the big run-up last night, we're seeing some people take the opportunity to cash out,'' Ng said.

The U.S. Federal Reserve this week agreed to lend American International Group Inc., the nation's biggest insurer by assets, $85 million in return for an 80 percent stake in the group, while Lehman filed the biggest bankruptcy in history Sept. 15. U.S. stocks slumped to the lowest in three years yesterday, with the Standard & Poor's 500 Index sliding 4.7 percent

`Unprecedented'

``These are conditions we've not seen before,'' said Mark Pervan, a commodity strategist at Australia and New Zealand Banking Corp. in Melbourne. ``When you've got major financial institutions falling over, this is unprecedented.''

Bullion's jump drove gold mining companies higher on the Australian stock exchange.

Newcrest Mining Ltd., Australia's largest producer of the metal, climbed 14 percent, to A$24.35 at 3:57 p.m. in Sydney. Lihir Gold Ltd. jumped 16 percent and Sino Gold Mining Ltd. gained the most on record, adding 32 percent.

Gold also rose as the VIX volatility index, a Chicago Board Options Exchange gauge reflecting expectations for stock market price changes and a barometer of risk aversion, rose yesterday to its highest since October 2002, ANZ's Pervan said.

``That rising series highlights a high risk to be playing equities,'' he said. ``The heightened uncertainty in U.S. financial markets has seen a switch out of equities and they've played oil and gold.''

Gold futures for December delivery advanced 2.5 percent to $871.90 an ounce in after-hours trading on the Comex Division of the New York Mercantile Exchange at 1:59 p.m. Singapore time. Bullion futures gained 9 percent yesterday, the most in 9 years.

To contact the reporters on this story: Madelene Pearson in Melbourne on mpearson1@bloomberg.netGlenys Sim in Singapore at gsim4@bloomberg.net

Last Updated: September 18, 2008 02:32 EDT