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Gold Is Too Hot for Investors to Handle as Prices Melt Down

It has been a rough few days on several fronts — disappointing consumer numbers causing investors to fret, fear of a slowdown in China after a slew of data, and of course gold’s big-time flop.

Gold prices have fallen some 23% from a high above $1,800 last fall to a current low of around $1,380.

And it looks like that’s only the beginning.

Charles Sizemore of Sizemore Capital Management points out that a big-time hedge fund manager unwinding his position is partially to blame for the declines — and thinks that until some of the big gold investors unwind their positions, it’s going to be dangerous to dabble in the precious metal.

That big-time investor is John Paulson, who is out $1.5 billion (on paper, of course) thanks to an aggressive bet on gold that went south.

This is a lesson is risk management that all traders should take to heart: When you bet big, things can get painful in a hurry if the market moves the other way.

Listen to what Charles has to say about the current declines and the future outlook for gold prices in 2013.

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Jeff Reeves is the editor of InvestorPlace.com and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP. As of this writing, he did not own a position in any of the stocks named here.

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