Gold plunges to lowest level in nearly 3 years

Matt Krantz, USA TODAY 2:28 p.m. EDT June 26, 2013


Gold bars are displayed at Shinhan Bank in Seoul.(Photo: Jung Yeon-Je, AFP/Getty Images)
Story Highlights

  • Gold and silver prices are crashing to levels not seen in nearly three years
  • Signs that the Fed may be close to easing on its stimulative push is hurting metals
  • Some think the precious metal bear market could have more downside


The price of gold sank to its lowest level in nearly three years Wednesday, as the precious metals bubble continues to pop.
Gold is suffering as investors continue to mull comments during the past week from Federal Reserve Chairman Ben Bernanke indicating central bank's massive stimulus might be winding down. If that's true, it spoils much of the investment thesis of gold being a safe haven because now rampant inflation appears less likely.
Gold "was a bubble," says Ken Winans of Winans International. "This is the unwinding of a bubble."
The price of gold Wednesday fell up to 4.2% to $1,224.18 an ounce, the lowest level since Aug. 24, 2010, says Bloomberg News. Gold is down roughly 23% this quarter, positioning the metal for its largest quarterly loss since 1920. Meanwhile, the price of silver is down to its lowest levels since August 2010. Wednesday, silver fell as much as 4.7% to $18.64 an ounce.
The massive sell-off of precious metals has pushed gold down roughly 40% from its high of more than $1,921 an ounce in September 2011, serving up a harsh reminder to investors commodities usually are to be traded, not bought and held, Winans says. Many of the doomsday scenarios that gold enthusiasts use to say that the metal was a long-term hold haven't materialized. "Many people out there were scared to death and loaded up with gold on the idea we will all be eating deer meat in the mountains," Winans says. "But they paid the ultimate price."
Making the problem worse was the creation of gold and silver exchange-traded funds, which made it as easy to buy gold as it is to buy shares of General Electric. These tools put commodities in easy reach of investors who had no experience with them, Winans says.
There could be more downside, Winans says. The last time gold crashed following a bubble was in 1980 and 1982. During that time, gold wound up losing 65% of its value, he says. "You're in a structural bear market for this stuff," he says.

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