Gold, Silver Gain as Fannie Mae Rescue Spurs Haven-Asset Buying

By Pham-Duy Nguyen

Sept. 8 (Bloomberg) -- Gold rose the most in two weeks after the U.S. government seized control of mortgage lenders Fannie Mae and Freddie Mac, boosting demand for the metal as an alternative asset. Silver also gained.

The government agreed to provide as much as $200 billion to the two biggest providers of financing for U.S. homes as they face losses from mortgage defaults. Some investors buy gold to hedge against turmoil in financial markets. Gold reached a record on March 17 after the U.S. brokered a deal for JP Morgan Chase & Co. to buy Bear Stearns Cos.

``Smart people understand the takeover is good in the short term and horrible in the long term,'' said Leonard Kaplan, president of Prospector Asset Management in Evanston, Illinois. ``They're buying gold because it's going to cost the American taxpayer -- either in higher taxes or higher inflation.''

Gold futures for December delivery rose $16.60, or 2.1 percent, to $819.40 an ounce at 9:05 a.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 Aug. 21.

Silver futures for December delivery climbed 24.5 cents, or 2 percent, to $12.57 an ounce.

Before today, silver fell 17 percent this year, while gold dropped 4.2 percent.

To contact the reporter on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net.