Recession Fears Drive the DOW Down – The U.S. stock market extended its sell-off to four days, as it traded down 391 points. Today’s volume was extremely heavy, which may be an indication that traders fear more losses to come. Markets are down worldwide, as recessionary fears are global and not just in the U.S.

Typically, gold follows the stock market down on days with significant downward momentum such as today. Traders have to sell whatever they can to raise cash and cover margin calls. They literally go by the motto coined by Art Cashin, “if you can’t sell what you want, then sell what you can.” Gold is liquid; they need cash, so gold gets sold. Speaking of Art Cashin, he is quoted today as saying stocks have not bottomed yet.

Silver, platinum and palladium all suffered steeper percentage declines than gold. These metals all have much higher industrial applications than gold, so if industry is slowing, demand could go down. Although gold went down almost $80 per oz, it did rebound slightly about mid-day and held. There is no news that would normally send gold prices down. In fact, under more normal circumstances, when fear comes into the market, gold prices tend to go up. Asian markets are about to kick in and since China and India represent 52% of the worldwide gold purchases, it could be an interesting night.

At 4PM (CT) the APMEX precious metal prices were:

· Gold price - $1,739.00 – down $69.10

· Silver price - $35.92 – down $4.57

· Platinum price - $1,688.80 – down $102.40

· Palladium price - $648.00 – down $65.80

U.S. STOCKS CLOSED HIGHER FOR 5TH DAY IN A ROW

Precious metals have settled since mid-day trading as two U.S. stock indexes continue to rise.

Some have an optimistic look at the future of our world’s financial situation, thinking there is a seemingly simple solution to the current financial and political problems we are having. Benjy Schwartz, Chief Market Strategist at Lightspeed Financial, says, “People are looking for some kind of certainty between Europe and the U.S., and we’re hoping by Oct. 11 for a conclusion to Greece, and more important Italy and Spain…They have plenty of time to come up with concepts that would facilitate stability. If we could all come together to work on the economic woes of this world it would help everybody…The federal government needs to show support for the American people by putting together some sort of jobs package, not by being political but by reasonable.”

There are many out there who do not feel that the world will be getting better any time soon and feel very bullish about gold as a strong asset class to invest in. They also see the potential for growth in this uncertainty. Martin Roberge, analyst at Canaccord Genuity, feels that this is just the calm before the storm for gold. Canaccord writes in a research note, “…investors shouldn’t let $1,800 gold dissuade them from participating in precious metals…The world is still dramatically underexposed to gold, and we firmly believe it should represent a higher percentage of investors’ total portfolios today.”

On a side note, China is making a move to accelerate gold trading by setting a national gold standard.

At 4:00 PM (CT) the APMEX precious metals spot prices were:

• Gold - $1,811.10 – Up $31.20.
• Silver - $40.76 – Up $1.24.
• Platinum - $1,815.50 – Up $31.90.
• Palladium - $737.00 – Up $9.60.