Gold Is a ‘Classic Bubble’ and Could Go All the Way Down to $500 an ounce : Pro

Gold is a “classic bubble” and “it wouldn’t shock me to see it back at $500”, Michael Novogratz, the president of New York hedge fund Fortress Investment Group and a former partner at Goldman Sachs (GS), said on CNBC Wednesday.

“I personally think gold is toast,” said Novogratz, adding that the precious metal peaked out at $1,900 two years ago.

In the past several months, gold prices have tanked. After gaining for 11 consecutive years and peaking at more than $1,900 an ounce in September 2011, the price of gold started falling steadily in October 2012. Its nosedive has intensified, with prices plunging through the $1,400 level in mid-April for the first time since early 2011. Despite moving above that support level for a while since then, prices were trading around $1,393.30, down $31.20, midday Wednesday.

It’s worth pointing out that as recently as six months ago, analysts were predicting that gold would spike to $3,000, $5,000 an oz, or more. Some wouldn’t rule out $10,000 either. The interesting part is that these prediction-based ‘analysis’ were being taken seriously.

In a “Squawk Box” interview, Novogratz said a recent chart of gold prices over those of the Nasdaq and Nikkei — back when those exchanges crashed — show that “once bubbles pop, they go all the way down.”

“Bubbles come around spectacular good stories that are believable” noted Novogratz, “once everybody believes it, there is no one else to buy.”

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