NEW YORK (MarketWatch) -- Gold futures jumped $70 an ounce Wednesday, the biggest daily gain in dollar terms in more than two decades, as anxiety highlighted by the U.S. takeover of American International Group fueled massive safe-haven buying.

Gold for December delivery ended the day up 9% at $850.50 an ounce on the Comex division of the New York Mercantile Exchange. That represents gold's biggest one-day jump in dollar terms since at least 1980, the earliest year historical data were available on the Comex. Gold futures started trading in the U.S. in 1974.

After the market closed, gold continued to rise more than $20 to $870.90 an ounce in electronic trading.

"Gold is acting like it is supposed to on a flight-to-safety move," said Amaury Conti, an equity trader at investment adviser Austin Calvert-Flavin. "We have a global financial crisis and nobody has a clear answer. Therefore stocks, currencies and debt are being questioned and nobody wants to own a 'paper' asset," he said. See Commodities Corner.

The Federal Reserve late Tuesday seized control of AIG AIG, -1.23% with an $85 billion bailout aimed at averting a potentially catastrophic bankruptcy. The move was the government's latest and most dramatic attempt yet to halt threats to the world's financial system. See full story.

The government's move came just two days after it refused to save Wall Street icon Lehman Brothers LEH, from a similar fate.

After AIG's takeover, the hunt resumed on Wall Street for the credit crisis' next potential victims, with the market seeming to focus for now on other investment firms Morgan Stanley MS, -2.35% and Goldman Sachs GS, -1.14% in the U.S.

Jon Nadler, senior analyst at Kitco Bullion Dealers, also pointed to concerns about Swiss bank UBS UBS, -0.54% .

Meanwhile, the financial turmoil accelerated in Russia as trading on the country's major exchanges was halted for a second day and the finance ministry announced plans to loan the country's three largest banks up to $44 billion. See full story.

Also fueling the turmoil, market fund pioneer The Reserve shook the market Wednesday when it cut the net asset value of its flagship Primary Fund, leading firms like Deutsche Bank, Legg Mason and others to try to calm investors and prevent a run on their funds. See full story.

Beyond gold, the recent turmoil could also encourage traders to put their money back into commodities. It can "buy the commodities sector some time," Nadler said.

"A stoppage of forced sales and a hoped-for return of some of the speculative spirit in various assets and the easing up in the hoarding of cash is what markets are effectively expecting out of the Fed's move," he said.

The bug is back

Gold bugs were also quick to point out technical and fundamental support for the precious metals.

According to Brien Lundin, editor of Gold Newsletter, a piling of short positions -- or bets that gold would fall -- had led gold's recent correction to under $750 an ounce. This, he said, was unjustified, "just as gold's run over $1,000 this year was unjustified."

"Now, the fundamentals of gold are coming back into play, and we're seeing the resulting snap-back in the price," Lundin said.

"Physical demand is breaking records, mining supply continues to fall, and the economic environment is, of course, promoting safe-haven demand," Lundin continued. "The shorts are covering, the funds are buying back in, and everyone wants the safety of gold."

Dollar falls

Deepening financial upheavals also hit the dollar, which fell against the euro and the British pound. The dollar index DXY, +0.09% , which tracks the value of the greenback against other major currencies, was at 78.015, down from 79.149 late Tuesday. See Currencies.

A weakening dollar tends to raise dollar-denominated gold prices.

Also moving gold prices was crude oil. After slumping 10% in the past two sessions, crude gained $6.01, or 6.6%, to close at $97.16 a barrel Wednesday. Read Futures Movers.

Other metals also moved higher. December silver surged 11% to $11.68 an ounce, October platinum added 1.7% to $1,086.30 an ounce, and December palladium rose 0.5% to $227.10 an ounce. However, copper for December delivery fell slightly to $3.04 a pound.

In spot trading, the London gold fixing price 38099902, used as a benchmark for gold for immediate delivery, stood at $813 an ounce Wednesday, up $33.5 from Tuesday afternoon.

Metals equities and exchanged-traded funds rallied along with gold prices Wednesday.

On the equities side, the Amex Gold Bugs Index HUI, added 11.7% to 314.33 points.