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London’s two leading bullion dealers, ATS Bullion and Baird & Co, have reported a rush of interest from savers, many of whom have hundreds of thousands of pounds worth of savings they want to convert into the precious metal.

At least two customers have invested the entire proceeds from selling their houses into gold, each buying up more than £500,000-worth of gold bars, according to one dealer.

Savers have been queuing in the street at ATS Bullion, whose offices are just off the Strand in London’s west end.

Sandra Conway, the company’s managing director, said: “We’ve had to turn people away. The queues have been right out of the door and it’s been really hectic at times.

“Ever since Lehman Brothers went bankrupt, the phones have been going off the hook.”

Traditionally, gold has been one of the safest investments during times of financial turmoil. In 1973 gold cost just $60 an ounce and hit $650 in 1981.

However, since the summer the price of gold has fallen as the dollar has strengthened – the two are linked quite closely.

But the fact that gold has not performed well in recent months has not deterred thousands of investors.

“They don’t think of gold as a way of making money. They think of it as a safeguard in these turbulent times. You can move gold quickly, in a way that you can not with shares or cash in a bank account,” Ms Conway said.

The average investor is buying up between £10,000 and £50,000 in bars on each visit, but it is possible to buy as little as a half sovereign coin, which costs about £70.

Some analysts say that while it may be romantic to buy bars of gold, there is a far more practical way to investing in gold. Investors can buy Exchange Traded Funds, which are like shares – they trade on the stock market – and they are directly linked to the price of gold.

Mick Gilligan, at stockbrokers Killik & Co, said that his clients had been asking about investing in gold in far greater numbers in recent weeks.

“Due to the extreme fluctuating market conditions for 2008, as well as current market conditions, gold and silver demand is unprecedented and the demand for platinum is unusually high,” the U.S. Mint said in a Monday memorandum to its authorized coin dealers.

“The U.S. Mint has worked diligently to attempt to meet demand, however, blank supplies are very limited and it is necessary for the U.S. Mint to focus remaining bullion production primarily on American Eagle Gold One Ounce and Silver One Ounce Coins,” the Mint said.

The Mint said it would continue to supply one-ounce American Eagle gold coins and one-ounce American Eagle silver coins on an allocation basis to coin dealers.

For half-ounce and quarter-ounce American Eagles, the Mint said that inventory was depleted last week and no more coins would be produced for 2008.

Produced from gold mined in the United States, the American Eagles have been novel items among collectors and investors since their introduction in 1986. Each coin has a face value of $50 but it is sold by authorized dealers at a premium to the price of gold.

The Federal Reserve said Tuesday it will buy “commercial paper,” a short-term financing mechanism that many companies rely on to finance their day-to-day operations, such as purchasing supplies or making payrolls.

The government moved quickly to use sweeping powers over the country’s banks granted in the Reykjavik parliament last night. The board of directors at Landsbanki has been dismissed and the bank put into receivership.

UK savers trying to access their Landsbanki-run Icesave accounts this morning were faced with a message telling them the bank was unable to process requests for deposits or withdrawals. Icesave offered competitive rates and has more than 200,000 accounts in the UK. The first €22,000 (roughly £17,000) held in the accounts is secured under an Icelandic compensation scheme, and the remainder up to £50,000 is guaranteed by the British government.

“Rumors are now circulating that today’s aggressive move by the Reserve Bank of Australia is the precursor for coordinated rate cuts by global central banks,” said Katie Dean, a senior economist at Australia & New Zealand Banking Group Ltd. in Melbourne.

Today’s reduction, twice as much as economists forecast, took the overnight cash rate target to 6 percent, the lowest since November 2006. Banks around the world have been hoarding cash, driving up lending rates, even as central banks including Australia’s pump money into the financial system.

Prime Minister Geir H. Haarde warned late Monday that the heavy exposure of the tiny country’s banking sector to the global financial turmoil was raising the specter of “national bankruptcy.”

The government’s attempt to gain control of the increasingly dire situation and restore some confidence in the country’s hard-hit banking sector followed a day of panic Monday that saw trading in shares of major banks suspended and the Icelandic krona shrink in value against the euro.

Iceland is paying the price for an economic boom of recent years that saw its newly affluent companies go on an acquisition spree across Europe and its banking sector grow to dwarf the rest of the economy. Bank assets are nine times annual gross domestic product of 14 billion euros ($19 billion).

Investors are now punishing the whole country for the banking sector’s heavy exposure to the global credit squeeze — its currency has gone through the floor, imports have fallen and inflation is soaring.

A major fear is that the government will struggle to rescue any other failing banks after last week coming to the rescue of the country’s third largest bank, Glitnir.

“In the perilous situation which exists now on the world’s financial markets, providing the banks with a secure life line poses a great risk for the Icelandic nation,” Haarde said in a televised address to the nation. “There is a very real danger, fellow citizens, that the Icelandic economy, in the worst case, could be sucked with the banks into the whirlpool and the result could be national bankruptcy.”

Just hours earlier, Haarde had said that no special measures were necessary — but credit lines to banks then seized up as speculation about the solvency of the country’s major banks reached fever pitch.

“The position has today altered completely and for the worse,” Haarde said.

The new laws will give the Central Bank of Iceland and the Icelandic Financial Supervisory Authority detailed and vast authority to intervene in the control and operation of Icelandic financial institutions, including the ability to take over or create new institutions, call shareholder meetings and limit the authority of boards.

Haarde told reporters that the government would not be closing banks, but foreshadowed the government taking control of more banks.

“We will not be closing banks but it is conceivable that some of them will not be able to function without our authorities intervening,” he told reporters, declining to name any potential candidates.

Earlier Monday, the Icelandic Financial Supervisory Authority suspended trading in financial instruments issued by Kaupthing, Landsbanki, Glitnir, Straumur-Burdaras, Exista and Spron, saying that “uncertainties regarding the issuers are likely to disrupt normal price formation, and as such, any trading could be detrimental for investors.”

The government also put 100 percent guarantees on savers’ deposits, following in the footsteps of Ireland, Germany, Austria, Greece and Denmark.

A collapse of the Icelandic financial system could also have ramifications across Europe given the heavy investment by Icelandic banks and companies across the continent.

One of the country’s biggest companies, retailing investment group Baugur, now owns or has stakes in dozens of major European retailers — including enough to make it the largest private company in Britain, where it owns a handful of well-known stores such as the famous toy store Hamley’s.

Kaupthing, Iceland’s largest bank and one of those whose share trading was suspended on Monday, has also invested in European retail groups.

Part of problem is that Iceland’s tiny size has led to a high level of cross ownership of assets between banks and companies, which creates a house of cards scenario.

In that eventuality, the central bank with its liquid foreign assets of just 4 billion euros ($5.5 billion) will be hard pressed to make any more bailouts — the big four banks have combined foreign liabilities in excess of 100 billion euros ($137 billion).

Royal Bank of Scotland Group Plc tumbled 39 percent after the bank had its credit rating cut for the first time in 10 years on a weak “financial profile.” Asian shares pared declines and European stocks gained in early trading after Australia lowered its key rate by one percentage point.

Europe’s Dow Jones Stoxx 600 Index tumbled the most since 1987 yesterday as bank bailouts spread and falling commodities dragged down raw-materials producers. The Dow Jones Industrial Average fell as much as 800 points, then recouped more than half its losses in the final 75 minutes of trading on speculation the Federal Reserve will lower rates.

The Stoxx 600 fell 1.4 percent to 238.09 at 9:15 a.m. in London, reversing earlier gains of as much as 2.6 percent. Futures on the Standard & Poor’s 500 Index slipped 0.6 percent. The MSCI Asia Pacific Index fell 1.1 percent, after earlier dropping as much as 3.2 percent.

The Stoxx 600, down 33 percent this year, was valued at 10.1 times the reported earnings of companies in the index yesterday, the cheapest since Bloomberg began compiling the data in January 2002. The MSCI World traded at 12.8 times profit yesterday, the cheapest since at least January 1995. The emerging markets gauge was valued at 9.5 times earnings.

RBS Falls

RBS dropped 39 percent to 90 pence. The bank had its long- term and short-term counterparty credit ratings lowered Oct. 6 to A+/A-1 from AA-/A-1+ by the London-based analysts at Standard & Poor’s. Last time the rating was reduced was in 1998.