Gold price on October 4 was down by more than $50 per ounce while oil prices slid by $2. The slide comes after two days of gold’s upward movement

Precious metals that went up two days in a row went down again. Notwithstanding the slide in the stock market, both gold and silver registered sharp drop. The fall has been sharp and gold was down around three percent. It had gone down as much as close to $50.

World stock markets are going down on fears of the bad reports emanating from Europe and the increasing fears of default by Greece. Asian and European stocks nosedived and the same is happening in the Wall Street right now.

Be it Dow Jones Industrial Average, S&P 500 Index or Nasdaq all are down. DJIA at the time of filing this report was down 201 points while S&P 500 Index was down by as much as 20 points and Nasdaq 38 points.

Meanwhile gold has amazed even the so called experts who had claimed yesterday it would continue its upward movement of the last two days for a long time to come. It has gone down to almost $1600 per ounce, shedding more than $50 in a matter of hours.

Meanwhile compounding the economic misery, oil prices too went down by $2 a barrel.

Ole Hansen, a financial expert was quoted by Reuters as saying, “Against a sea of red, (gold) probably will continue to struggle, as its safe haven (appeal) has been somewhat put into question over the last month…Further losses on the S&P, which are now likely considering how we are testing recent lows, could trigger additional long liquidation of profitable positions.”

France and Belgium stepped in Tuesday to guarantee the financing of the troubled cross-border bank Dexia, as its shares plunged spectacularly on reports that it was to be broken up.

The governments, shareholders in a bank that specialises in investing local government funds, acted as Dexia faced the threat of becoming the first major European institution to fall since the sovereign debt crisis began.

Shares in Franco-Belgian bank plunged more than 37 percent in early trade on Tuesday, later trimming the loss to around 20 percent, as the French and Belgian finance ministers issued their statement.

“In the framework of Dexia’s restructuring, the governments of France and Belgium, in coordination with our central banks, will take all necessary steps to ensure the protection of depositors and creditors,” they said.

“To this end, they undertake to guarantee any finance raised by Dexia.”

Speaking at a meeting in Luxembourg, French Finance Minister Francois Baroin, compared the guarantee to the countries’ earlier 6.4-billion-euro bailout of Dexia in 2008, when it was hit by the US sub-prime loan crisis.

He said the governments would again “answer ‘present’,” if called upon, in order to protect “deposits in Belgium and loans to local governments.”

Dexia is the leading provider of local government financing in France.

“Whatever happens, we will put in place a quick and effective solution which will guarantee there will be no collapse for this vital activity,” Baroin said.

However, he did not spell out that there would be an eventual injection of state capital. “All we are saying is the states will be present like in 2008,” he said.

For his part, Belgian minister Didier Reynders, confirmed one of the options being considered was setting up a so-called “bad bank” to house Dexia’s riskiest debts while protecting its core business.

“France and Belgium are ready to guarantee the financing of Dexia, in whatever form it takes,” he said. “We’ve spoken a lot about a ‘bad bank’ — It’s one of the options.”

Belgium’s government was to hold an emergency meeting to assess the situation in Dexia late on Tuesday, Reynders added.

Late on Monday, the Franco-Belgian bank had held an emergency board meeting which left open the possibility of it being broken up.

“The worsening of the European sovereign debt crisis and the tensions on the interbank market led Dexia to accelerate its restructuring plan in May 2011,” the bank said after a six-hour crisis meeting in Brussels.

“However, in the current environment, the size of the non-strategic asset portfolio (so-called ‘legacy’) impacts the Group structurally despite the good credit quality of its assets,” it explained.

“This is why the Board of Directors asked the CEO … to prepare the necessary measures to resolve the structural problems penalising the Group’s operational activities,” it said.

Jean-Michel Cappoen, the head of the Belgian financial sector union Setca, told AFP: “According to the information we obtained after this meeting, the whole bank is up for sale. It’s the end of the road.”

Dexia’s shares had alreay lost more than 10 percent on Monday on warnings of an imminent credit rating downgrade over fears about its liquidity and wider concerns of exposure to eurozone sovereign debt.

“This is the first bank that has really been hit by the current crisis,” said trader Dov Adjedj at BGC Aurel securities. “It was already weak due to its very high level of assets.”

The long-term financing deals with French local authorities could also be among the first part of operations to be hived off, banking sources told AFP.

The 70 billion euros in such assets would likely be taken over by a special vehicle created by the French state-owned Caisse des Depots and the Post Bank, the French daily Le Figaro reported.

Some 95 billion euros in troubled non-strategic assets that are weighing heavily on the bank could be split off into a “bad bank” or other vehicle.

Other assets would be split off and sold, including a Turkish banking unit, asset management services, private banking, and retail banking in Belgium.

Russia on Tuesday reported $18.7 billion in capital outflows in the third quarter that far outweighed state estimates and underscored the uncertainty gripping the country in recent months.

The Central Bank said the poor quarter came on top of $30.6 billion (23 billion euros) that had left Russia between January and June, bringing the nine-month total to $49.3 billion — three times the $16 billion seen one year ago.

Government officials have blamed the capital flight on a fragile business climate in which investors complain of red tape and the inability to defend their rights in court.

But economists said even more money headed for safer harbours in the second half of the year while investors waited for Prime Minister Vladimir Putin to announce whether he planned to grab back the presidency he held in 2000-2008.

Putin on September 24 ultimately disclosed plans to return in March polls that will almost certainly see him replace his hand-picked successor Dmitry Medvedev as head of state

But the market’s relief over that announcement was followed by the shock resignation days later of Russia’s respected finance minister Alexei Kudrin.

Emerging Portfolio Fund Research said some $443 million had been pulled out of funds that invested in Russia that week compared to $164 million that left on week ending September 21.

The veteran fiscal conservative’s brief has since been handed to First Deputy Finance Minister Igor Shuvalov — another Putin ally who previously oversaw Russia’s industrial policies.

The English-speaking Shuvalov has a reputation for being a consummate political insider who is responsible for restoring Russia’s image at international forums such as the G8.

Yet he is also seen as a more pliable figure who may be more willing to fit the country’s tight budget in line with Russia’s plans to boost expenditure on the military and other pricey projects.

Shuvalov told a US investment forum on Tuesday that his government was open for business despite Russia’s reputation for corruption and graft.

But he also urged patience and stressed the importance of social stability — a mantra of Putin’s rule that worries some investors.

“Improving the country’s business climate is a long-term process,” Dow Jones Newswires quoted Shuvalov as telling a US-Russian Business Council in Chicago on Tuesday.

“It’s impossible to change the country very quickly,” said Shuvalov. “It’s very hard work that will need time. In order to have that time we need social stability.”

The Central Bank figures were reported only moments after Shuvalov spoke and no Russian official has yet referred to them directly or tried to explain the enormous jump.

Officials had earlier predicted $36 billion in total capital outflows for 2011.

The Central Bank meanwhile also gave estimates for the capital position dependent on the price of oil — a key export earner for Russia and crucial for the public finances.

It said an oil prices average of $75 per barrel in 2012 would still see $15 billion in net outflows as the export income generated continued to leave the country.

The oil income would balance the capital outflows at $100 per barrel while a price of $125 would result in a capital gain for the year of $10 billion — still a very small figure compared with actual energy earnings.

The estimates highlight the importance of energy exports even as Putin and Medvedev have stressed the need to wean Russia off them and modernise its economy.

VTB Group Chief Financial Officer Herbert Moos said oil price shocks now posed one of the biggest risks to foreign investors in Russia.

“There is no large manufacturing, banking or financial sector (in Russia) that could absorb the shock” of plunging oil prices, Moos told the RIA Novosti news agency.

US prosecutors said Tuesday that former hedge fund manager Raj Rajaratnam should be given a hefty prison sentence next week, arguing that illegal gains from his insider trading netted about $72 million.

Assistant US Attorney Andrew Michaelson told a court hearing that Rajaratnam should be punished for personal gains and also for the money that his illegal trades earned his Galleon Group hedge fund.

Another prosecutor, Reed Brodsky, argued that Rajaratnam further aggravated his crime by acting as leader of a wider conspiracy.

They demanded he be sentenced to as much as 293 months, or about 24.5 years, in prison, and a minimum of 19.5 years.

“Mr Rajaratnam is uniquely situated… (as) an individual at the top of a pyramid in his hedge fund” with “interlocking trading schemes,” he said.

However, lawyers for the Sri Lankan-born founder of Galleon are urging leniency, with a sentence of as little as six and a half years.

One complained about prosecutors’ attempts to get an “extravagantly high sentence” and said that Rajaratnam had never led a broader insider trading effort, but essentially acted alone on tip-offs.

Defense lawyers have also asked the court to consider what they say is a “constellation of ailments ravaging his body,” although they have also asked for the details of his condition to remain private.

Federal Judge Richard Holwell is to hand down the sentence on October 13.

Rajaratnam, 54, was considered one of Wall Street’s best performing hedge fund managers before being accused in the biggest insider trading investigation in years.

The US attorney’s office has made a priority of prosecuting Rajaratnam and his sentencing is being closely watched.