For years, investors known as gold bugs snapped up the metal, betting a colossal economic crisis one day would send gold prices through the roof.
But the crisis has come, and after briefly hitting $1,000 an ounce for the first time in March, gold is in a rut.
Some say it's simply in a lull and is ripe for another big surge. But most gold buyers agree its lackluster performance lately is surprising.
Since soaring to an all-time high of $1,033.39 an ounce on March 17, gold has plummeted 30 percent. Monday, gold for December delivery rose $8.60 to settle at $726.80, roughly the same level as a year ago.
So what happened? As the financial crisis pummels financial markets, large gold investors are cashing in to cover huge losses. Such massive deleveraging has pounded other commodities, too.
“Gold is being pulled down by indiscriminate selling of virtually every asset,” said Jeffrey Nichols, managing director at New York-based American Precious Metals Advisors. “You could call it collateral damage.”
Instead of gold, investors are pouring money into cash. That has pushed the dollar to multiyear highs against the euro and pound, hurting gold demand.
Some gold watchers are betting on another big climb. They argue the dollar's recent rally can't last as long as the government has to pay for mammoth financial bailouts by either printing money or raising taxes.