October has gone down as one of the worst month for financial markets in recent memory. Equity markets worldwide plunged as investors resorted to panic selling. Credit markets seized while the central banks the world over scrambled to ease the pressure by reducing the interest rates. Earlier September saw some of the bigger names like Lehman Brothers, AIG, Washington Mutual, Goldman Sachs and Morgan Stanley shut shop or merged into bigger banks or converted themselves into Fed regulated commercial bank. The turmoil in the markets lead to massive layoff as companies took to cost cutting measures. Unemployment rate was steady at a four year high of 6.1% in September.

However, despite a full blown crisis, Gold has not been really rallying. In the month of October alone, prices of Gold futures plunged 17%, the biggest monthly decline in 28 years. The price of yellow metal has fallen over 30% from its peak.

It seems that the month of October has turned out to be one of the worst in recent past, not only for the equity but commodities as well. The Reuters/Jefferies CRB Index of 19 commodities has lost 43% July peak. Crude Oil, the largest traded commodity by value is down 32.6% in October, its worst monthly drop on record. It has retreated over 50% from its peak of $147. Falling crude Oil prices has ensured a steady decline in global inflationary pressure, which in turn has taken shine off the precious metal. Some of the experts have already started talking in terms of possibility of deflation like situation in near future. Gold has been traditionally seen as a "hedge against inflation" and hence a decline in general price levels does not bode well for the metal.

Gold, commodities and other asset class also suffered due to "deleveraging" across the asset class. Collapse of influential Wall Street players has triggered a massive deleveraging exercise and hedge funds/pension funds are cutting down their exposure in commodities space to cover losses in equity markets. No doubt, tight liquidity situation in global markets limited a potential upside for gold.

Perhaps the strongest factor that has been depressing the gold prices is the reemergence of US Dollar, a rival of Gold, as "safe haven”. The value of dollar against world's major currencies (except Yen) has skyrocketed. The dollar index, which tracks the value of the greenback against a basket of major rivals, has gained 11% in October. Dollar hit two year high against Euro and rose a record 10.6% in October. US Dollar has emerged as the preferred choice of funds as during recession, cash, cash equivalents or access to money is what matters the most. With US G.D.P contracting by 0.3% in the third quarter, the global economy is almost on the verge of a recession. During recession, demand for commodities drops universally. Thanks to problems in Emerging markets, and collapse of economies like Ukraine, Hungary and Pakistan, dollar has seen the most of fund flow. The greenback still retains its status of reserve currency and throughout the last decade, an average of two thirds of the total allocated foreign exchange reserves of countries have been in U.S. dollars. Also, a large majority of international trade is settled in dollar only.

Some of the experts however, still remain quite upbeat. It is being argued that sooner or later, gold will resume its upward momentum as the precious metal has performed well during every US recession in past three decades.