If You're Worried About Gold Prices, You Need to Read This

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When stocks fall by 20% or more from their peak, it's labeled as a "bear market."

With gold prices down 26% from their record close back in August 2011, the "yellow metal" has entered a bear market of its own.

It took an especially ugly day on Monday to get us to that point.

Two days ago, gold prices plunged as much as 9.7% - the biggest decline since 1980 - and continued a sell-off that saw the yellow metal fall by 4.7% last week, including a 4.1% drop on Friday.

The metal has now fallen 26% from its Aug. 22, 2011 settlement record of $1,888.70.

To get some expert insights on this sell-off, I telephoned Peter Krauth, our resident natural resources expert and editor of our Real Asset Returns research service. Peter based himself in Canada to be closer to the miners and natural-resources companies he covers for his subscribers.

I asked Peter for insights on the following three questions:

  • Why this is happening.
  • What you can expect from here.
  • And what investors should do.

He was as accommodating as ever.

"Bill, it's been ugly - really ugly - there's no question about that," Peter said. "But there's an interesting twist to this, one that I'm glad we're taking the time to talk about here. You see, I really believe this is one of those situations that investors would do well to drill into. In fact, I will go on record here and say that I firmly believe that investors who take the time to understand the forces at work here, who take the time to find the right profit opportunities, and who are willing to take the long view will end up being well-rewarded for having done so."

Peter said there are at least four catalysts that are fueling this historic sell-off, including:

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