Follow the instructions!
If you got a landing clearance and then he told you to extend downwind, his last instruction was to extend downwind so that's what you should do.
The go around works, but it makes everyone's hair stand up when they're not expecting that, especially when the controller told you to do something and any other pilot on freq would have heard the same thing.
So anyone on frequency in the immediate vicinity is expecting to see an aircraft extending downwind.
For clarification on his part, he could have given a traffic call or a brief explanation. That would be considered additional service, but it gives everyone the warm and fuzzy to know why they're are being told something different.
Hope this helps! You'll get it, and remember it's the controllers job to keep you safe!