Instructions
Earn enough bells to obtain a fountain for your town. The fountain costs 400,000 bells and requires you to donate the bells to the "Town Fund" in the city hall. A fountain is placed somewhere in your town once you donate enough points. Expect to see a fountain within a week of your donation.
Set your active tool to "axe" by clicking the tool in your pocket and selecting "Carry." Go to the town fountain and stand directly in front of it.
Click the "C" button on your nunchuck controller to fling the axe into the fountain. Serena will appear and ask you a series of random questions. Her decision to give you back your axe or provide you with a gold or silver axe will depend on how she feels about your answers. You can attempt to get a silver or gold axe once per day.