Actually, chains are one of those things that I feel you really can't effectively "make" yourself and should use real scale chain. You can pick up chain in the model ship building section of most hobby stores.
Alternatives include craft chain, which you can get at most arts and crafts stores or even Walmart, or using old costume jewelry chain, which can also be picked up for very little expense. But, if your spouse/girlfriend has an old, cheap neaklace that they never wear...
Enjoy your modeling...
[Edit: Beat me by 3 minutes!]