Investors are grabbing for dangled karats

— -- Auto sales have plunged the past 12 months. Home sales? Nothing good to report there, either. And if you're trying to sell $5 cups of coffee these days, well, good luck with that.

But in this recession-racked world one thing is selling: gold.

"We're selling 10 times the amount we were selling a year ago," says Arthur Blumenthal, representative for Stack's, a Manhattan bullion and coin dealer. Even as department stores slash prices, the price of gold has soared from a low of $713 in October. Wednesday, as the Standard & Poor's 500-stock index fell 0.75 points, gold leaped nearly $11 to $977.70 an ounce.

The sizzle in this steak: fear. Terror that the economic system will collapse. Worries that the government will run the printing presses to pay the massive bailout program, fueling inflation and weakening the currency. "Gold is almost an insurance policy," Blumenthal says. "It will always be there, and always pay."

The question: Is the fear warranted? Economists today are more worried about a long period of falling prices, not skyrocketing inflation. But to gold bugs — some of whom have been predicting hyperinflation for nearly three decades — there's no doubt.

"What's going on now is just really serious, the most serious recession since the start of the Industrial Revolution," says Doug Casey, president of Casey Research and author of the 1979 best seller Crisis Investing. And if Casey is right, what's wrong with the world will be great for gold.

Glittering sales

Gold has become so popular that, for the first time, a gold dealer ran an ad during the Super Bowl. Cash4Gold.com's ad featured Tonight Show sidekick Ed McMahon and rapper MC Hammer talking about selling everything from gold records to gold hip replacements.

Selling your old gold certainly makes more sense now than it did in April 2001, when gold hit a low of $256 per ounce. But for gold investors, buying gold near $1,000 an ounce seems to make a great deal of sense, too. Sales of 1-ounce gold U.S. Eagle coins soared to 92,000 ounces in January, vs. 22,500 ounces a year ago.

"January was the best month we've ever had, and February is shaping up to be the same," says David Breahm, vice president of economic research at Blanchard & Co., a New Orleans bullion dealer. "We sold more gold in January than in all of 2007."