Even as investors have flocked to gold for safety, its price has dropped recently. It fell to $681 an ounce intraday Friday, a loss of 19 percent year-to-date.

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Even as investors have flocked to gold for safety, its price has dropped recently. It fell to $681 an ounce intraday Friday, a loss of 19 percent year-to-date.

Gold usually gains in times of crisis, but this time it’s been pressured amid a stronger dollar and forced selling by hedge funds, says Natalie Dempster of the World Gold Council. Gold is viewed as a hedge against a weak dollar and inflation.

In the third quarter, council-sponsored SPDR Gold Shares (GLD), the largest gold-backed exchange-traded fund, saw the biggest inflows since its November 2004 inception, says Dempster.

Year-to-date, assets are up 36 percent, according to TrimTabs Investment Research. In another sign of gold’s popularity, the U.S. Mint in September suspended sales of a 24-karat gold coin because it couldn’t meet demand.

With the stock market down about 40 percent this year, hedge funds and other investors have taken profits on gold to raise cash to meet margin calls. Some sold even if they were bullish on the metal, Dempster says. A stronger dollar and a broad commodity sell-off amid demand worries also played a role, she says.

Michael Cuggino, manager of Permanent Portfolio (PRPFX), predicts more volatility in gold as leverage is unwound amid the credit crisis. Longer term, he’s bullish, expecting inflation fears to return once the economy recovers.