NEW YORK -- For years, investors snapped up gold and socked it away, betting that a colossal economic crisis someday would slam financial markets and send gold prices through the roof.
For many investors, that grim scenario is in full swing, except for one thing: After briefly hitting $1,000 an ounce in March, gold has fallen into a rut and shows no sign of budging.
Gold's failure to flourish despite broad financial carnage has disappointed many of its champions. Others say it's simply in a lull and is ripe for another big surge. But most gold buyers agree its lackluster performance lately has been surprising.
"It's been a puzzle for most of us," said Geoff Farnham, Venice, Calif., who inherited some gold holdings and recently began buying gold coins. "Knowing that there aren't a lot of gold coins out there to buy, seeing the price continue to drop has been curious."
It's also been punishing for investment portfolios. Since soaring to an all-time high of $1,033.39 an ounce on March 17, gold has plummeted 30 percent. Gold futures for December delivery rose $8.60 on Monday to settle at $726.80 -- roughly the same level where it traded a year ago.
So what happened? As the financial crisis pummels financial markets around the globe, hedge funds and other large investors who drove gold to dizzying heights are now racing to unwind those positions to raise cash and cover huge losses. The massive deleveraging has pounded other commodities from crude oil to corn.
"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 the pound, hurting demand for gold among investors who buy the metal as a safe haven against inflation.
