Gold rose further in London on Tuesday, touching $888 an ounce and unwinding last week's action entirely as world stock markets rallied from their new record sell-off.

Rumors starting late in New York ran from Tokyo to London, claiming that the US Fed and other big central banks are set to slash global interest rates in joint action.

"If this doesn't come to fruition we could be a whole world of trouble," says the chief dealer at I.G. Markets in London.

The "silent run" meantime continued on troubled banks – enabled by internet cash transfers and encouraged by Competitive Bail-Outs in Europe – with shares in RBS, one of the world's 10 largest banks, losing half their value from last week's close on rumors it's seeking emergency aid from the UK government.

"As the banking sector continues to fall from one crisis to the next and equities continue to sell off, there aren't many places to put your money," reckons Tom Kendall, precious metals strategist at Mitsubishi in Tokyo.

"The Dollar's a touch weaker, which is helping Gold."

Trying to revive its slowing economy, the Reserve Bank of Australia today slashed its target interest rate by a surprise 1%, helping the ASX share index reverse an early 3% fall.

India's central bank cut its rate by 0.5% in Mumbai. As recently as July it hiked the cost of money to fight inflation – then at a 13-year high.

The US Federal Reserve, meantime, may start making unsecured loans for the first time in its history, says a report in the Financial Times, buying "commercial paper" – issued by banks to fund business and consumer loans – directly.

Iceland today nationalized the failing Landsbanki, the tiny country's second-largest bank, and entered talks to secure an emergency $5.4 billion loan from Russia.

"With oil prices collapsing and international banks being routed," said the chief of Libya's National Oil Corp. – calling for an emergency meeting of the Opec oil cartel – "it's better to keep our oil underground."

Crude oil managed its first bounce today bounced to $89 per barrel after losing Gold today recorded a London Fix of $881.75 an ounce, more than 5.4% above Monday morning and almost one-fifth above this time in 2007.

The S&P index of US stocks has lost almost one-third of its value since then.

European stock markets bounced meantime, adding 1% in London after yesterday's 21-year record plunge. Germany's Dax index, however, recovered just 13 points of the 1,034 lost since the start of Sept.

German factory orders slumped 7.6% in August from the same month last year.

Six-month British gilt yields sank below 3.0% as large investors piled into government paper. Borrowing 6-month gilts overnight, in contrast, now costs 4.58% annualized.

"There's still a massive lack of confidence in [the interbank lending] market," says Jan Misch, a money-market trader at Landesbank Baden-Wuerttemberg in Stuttgart, Germany.

"The more we talk about it, the more it becomes a self- fulfilling prophecy. Sentiment hasn't improved much and rates remain at elevated levels."

Today the Bank of England auctioned £40 billion ($70bn) of short-term money in exchange for a much-widened range of collateral, now including "AAA-rated" securities backed by corporate and consumer loans, as well as commercial paper.

"The weekly extended collateral repos will continue until at least Tuesday 18 November," says the Old Lady.

The Gold Price in British Pounds meantime came within a whisker of setting new all-time highs above £510 per ounce, rising more than 3.6%.

European investors also saw Gold leap towards the record high it set back in March, adding 2.9% to €655 an ounce.

Converted into old German Deutsche Marks, gold today recorded only its 32nd ever morning London Gold Fix above DM 40,000 per kilo.

Eleven of those have come since Feb. this year.