Gold plunges 5% on 'extraordinary selling'

John Waggoner | USATODAY

Gold prices plunged nearly $77 an ounce -- more than 5% -- to below $1,500 Friday afternoon on massive selling.

"From what I've heard it's just extraordinary selling on the Comex," says Caesar Bryan, portfolio manager of the Gabelli Gold fund.

Gold has been falling steadily since its peak at about $1,900 an ounce in September 2011. Early reports said much of the selling Friday was tripped by stop-loss orders, which are directions to sell an asset when the price reaches a specific point.

Clusters of stop-loss orders near a specific price will often cause a cascade of selling as each order is tripped and brokers dump their holdings.

The collapse in gold is unusual in that it seems to have little relation to economic events. Gold typically rises on worries about inflation or currency collapse, neither one of which has seemed likely lately.

The most recent economic news has indicated a softer economy, which is unlikely to spark inflation. And the dollar has risen against the euro and the yen.

Shares of SPDR Gold Shares, an exchange-traded fund (ETF) that buys and sells bullion, were down more than 4% shortly before the close. Gold bullion was down $77, to $1,487. Volume was heavy in the early morning, but tapered off by the afternoon.

Sales by gold ETFs could be making the debacle worse. Worldwide, gold ETFs hold 80.8 million ounces. SPDR Gold Shares, the largest gold ETF, has 38 million ounces.