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The agency said it would guarantee up to $50 billion dollars for the next year for both retail and institutional investors.

Money market funds invest in short-term debt issued by the federal government or by companies, and are widely used by consumers as a place to stash their extra cash.

Typically, putting money in these funds was thought to be as safe as money in the bank.

But these funds, which also serve as a fundamental source of financing for both financial institutions and capital markets, have come under severe strain in recent days following the dramatic events from earlier this week including the dramatic collapse of Lehman Brothers and the federal government’s rescue of the insurance giant AIG.

The Treasury Department said the action should help return some confidence to the market and alleviate investors’ fears about the ability for money market mutual funds to absorb a loss.

Generating their own power and growing their own food, they strived for self-sufficiency and thrived in homes that looked more suited to the hobbits from The Lord of the Rings.

Then a survey plane chanced upon the ‘lost tribe’… and they were plunged into a decade-long battle with officialdom.

Yesterday that fight, backed by more modern support for green issues, ended in victory.

The eco-community in the Preseli mountains of west Wales was set up in 1993 and lived contentedly away from the rat race round a 180-acre farm bought by Julian and Emma Orbach.

Gold for December delivery rose as much as $90.40, or 11.6 percent, to $870.90 an ounce in after-hours trading on the New York Mercantile Exchange after jumping $70 to settle at $850.50 in the regular session. That was the biggest one-day price jump ever; gold’s previous single-day record was a $64 gain on Jan. 29, 1980.

The huge rally came after the government moved overnight to rescue troubled insurer American International Group Inc. with an $85 million bailout loan. The Federal Reserve stepped in after AIG, teetering on collapse from losses tied to the subprime crisis and the credit crisis, failed to find adequate capital in the private sector. The emergency measure came a day after Lehman Brothers Holdings Inc., a 158-year-old investment bank, filed for bankruptcy after failing to find a buyer.

Fearing more tightening of credit markets, investors reacted swiftly and began dumping stocks and socking money into gold, silver and other safe-haven commodities. Gold is especially attractive during times of crisis because the metal is known for holding its value.

Jon Nadler, analyst with Kitco Bullion Dealers Montreal, said buying accelerated as rumors spread across trading floors that another financial firm may be in trouble.

The Transportation Security Administration (TSA) is running a test at a North Carolina ferry terminal of a 21-foot-high arch-like machine that shoots low-intensity X-rays at cars as they pass through. The photos show whether explosives or drugs might be in the car.

The technology, called backscatter X-ray, is in use at several airports to screen passengers. Privacy advocates have denounced scanning people as invasive because the X-rays can see through clothes.

Melissa Ngo, a Washington, D.C., lawyer who focuses on privacy issues, says using the technology for cars could pave the way for “Big Brother” government spying.

The obstacle, however, is that “no one knows what’s in their books,” the person said, speaking on condition of anonymity because of the sensitivity of the matter. There could be, he said, “a minimum amount of value there.”

The culprit was debt securities it holds issued by Lehman Brothers Holdings Inc.

The news raised the prospect more losses might be in store for other money-market funds holding paper from Lehman, which collapsed Monday, and from other problem-ridden firms. As of Friday, the Reserve Fund had assets of around $62 billion, but they have fallen considerably since.

The development “is really, really bad,” said Don Phillips, one of the founders of Morningstar Inc. “You talk about Lehman and Merrill having been stellar institutions but breaking the buck is sacred territory.”

The Reserve is a New York cash-management firm that prides itself on creating the first money-market fund. It has dubbed itself “the world’s most experienced money fund manager” with $125 billion in assets through June. It didn’t return calls for comment.

The Reserve Primary Fund isn’t the only money market fund that’s struggling:

On the heels of the Primary Fund’s announcement, Standard & Poor’s cut its credit rating from the highest for money-market vehicles, AAAm, to Dm, the lowest.

One much smaller money fund under the Reserve’s banner, the International Liquidity Fund Ltd, also dropped below the $1 standard. That fund is available only to offshore investors. Separately, a money-fund-like investment pool for municipalities not managed by the Reserve, Colorado Diversified Trust, also “broke the buck,” but S&P reported that it will be folded into another Colorado entity. S&P downgraded both the International Liquidity and Colorado Diversifed funds as well, from AAAm to Dm.

Equities tumbled even after the Federal Reserve took over the biggest U.S. insurer. The cost of borrowing dollars for three months jumped the most since 1999 as banks hoarded cash. Central banks in the Phillipines and Venezuela said they may buy gold. In March, the metal reached a record as the government steered JPMorgan Chase & Co. to buy Bear Stearns Cos.

“With paper assets in question, gold represents the textbook storehouse of value,” said Ron Goodis, the futures trading director at Equidex Brokerage Inc. in Closter, New Jersey.

Gold futures for December delivery gained $66.10, or 8.5 percent, to $846.60 an ounce at 1:17 p.m. on the Comex division of the New York Mercantile Exchange. A close at that price would mark the biggest percentage gain for a most-active contract since Sept. 28, 1999. Gold reached a record $1,033.90 on March 17.

Silver futures for December delivery rose 96.3 cents, or 9.2 percent, to $11.48 an ounce. A close at that price would mark the biggest gain since March 30, 1995.

Before today, gold fell 6.9 percent this year, while silver tumbled 30 percent.

About $2.8 trillion of market value was erased from global stocks this week as Lehman Brothers Holdings Inc. filed for bankruptcy, Bank of America Corp. purchased Merrill Lynch & Co. for $50 billion, and the U.S. government took control of American International Group Inc. in an $85 billion takeover to prevent the biggest financial collapse ever.

Russian Banks

Russia halted stock trading for a second day and poured $44 billion into its three biggest banks in a bid to halt the worst financial crisis in a decade.

“You’re sorting out, by process of elimination, that gold is the asset you’d rather own,” said Greg Orrell, who manages the OCM Mutual Fund at Orrell Capital Management Inc. in Livermore, California. “It’s the currency you’d prefer.”

U.S. Treasury three-month bill rates dropped to the lowest since at least 1954. Investors pushed the rate as low as 0.0304 percent.

“It’s not even worth it to keep money in the bank,” said John Licata, the chief investment strategist at Blue Phoenix Inc. in New York. “Gold is going to be the beneficiary of a global move toward a safe haven.”

Reserve Primary Fund, the oldest U.S. money-market fund, yesterday became the first in 14 years to expose investors to losses after writing off $785 million of debt issued by Lehman.

`Systemically Scary’

“That’s systemically scary,” said Frank McGhee, the head dealer of Integrated Brokerage Services LLC in Chicago. “Unless you put gold in your backyard, you have to trust your money to an institution.”

Gold’s gains accelerated after prices topped $800, analysts said.

“There are going to be more banks that will fail,” said Matt Zeman, a metals trader at LaSalle Futures Group Inc. in Chicago. “This is the time when people want to buy gold.”

London-based researcher GFMS Ltd. said gold may rise to $950 by the end of the year as central banks and mining companies hold back sales and investors buy the metal as a haven against falling equities.

Since the second quarter of 2007, banks worldwide have posted $515.5 billion in losses and writedowns related to investments in subprime mortgages. The Fed has also engineered $200 billion in takeovers for Fannie Mae and Freddie Mac, the biggest providers of financing for U.S. homes.

Central Bank Buyers

The world’s central banks, already the biggest holders of gold, may look to the metal as an alternative reserve asset to the dollar, said Dennis Gartman, an economist and the editor of the Gartman Letter in Suffolk, Virginia. Until today, Gartman had been bearish in his outlook for gold.

The ruble-denominated Micex Stock Exchange suspended trading indefinitely at 12:10 p.m. after its index erased a 7.6 percent gain and plunged as much as 10 percent within an hour. The benchmark fell 17 percent yesterday, the biggest drop since Bloomberg started tracking the gauge in May 2001. The dollar- denominated RTS halted trading after similar declines.

The government yesterday injected $20 billion into the interbank lending market via central bank and Finance Ministry auctions in a bid to contain soaring borrowing rates as credit dried up in the wake of the Lehman Brothers Holdings Inc. bankruptcy. The one-day MosPrime overnight rate, a gauge for monitoring liquidity demand, leapt 25 basis points to a record 11.08 percent today.

The Finance Ministry attempted to stop the selloff by offering 1.13 trillion rubles ($44 billion) of budget funds to the country’s three biggest banks, OAO Sberbank, VTB Group and OAO Gazprombank, for at least three months. That measure came as KIT Finance, a Russian brokerage, said it’s in talks to find a buyer after failing to meet some financial obligations related to repurchase agreements.

Bond Market `Closed’