Barrick (NYSE:ABX), Goldcorp (NYSE:GG), Newmont (NYSE:NEM) Getting Crushed as Gold Prices Drop

China is the gold story today, as the surprising increase in their consumer price index generated rumors they may raise their interest rates to combat inflation, and panicked speculators and traders fled gold and spot gold prices today plummeted by over $40 an ounce, bringing down gold mining giants Barrick Gold (NYSE:ABX), Goldcorp Inc. (NYSE:GG) and Newmont Mining (NYSE:NEM).

Long-term gold investors aren't too concerned over the plunge in gold prices, as they've been waiting for another entry point because gold prices have taken very little breather lately.

For gold traders and speculators, they're selling their long positions in gold to cover margin calls in other sectors, which in the case of equities have been hammered lately.

Gold shorts will enjoy their day in the sun, something that hasn't happened much in the recent past.

Goldcorp traded at $45.84, dropping $1.41, or 2.98 percent, at 12:51 PM EST. Barrick Gold was at $50.31, losing $1.57, or 3.03 percent. Newmont was at $60.86, falling $2.16, or 3.43 percent.

Gold Prices Today Surge in Morning, Down in Afternoon

Gold traders bid up the price of gold today, reaching almost $1,250 before pulling back in the afternoon. At 1:30 P.M. EST, gold prices stood at $1,227.8.

This is attributed to the traders pulling out profits after driving the metal up in morning trading.

All of that is just part of normal activity, but doesn't have much to do with the support or underlying fundamentals of gold, which are primarily safety, inflation hedge and an alternative currency.

Paper currencies have lost a lot of trust from people, and when that happens, being fiat, there is nothing left to shore them up.

Macro-economic issues continue to be the European sovereign debt crisis and the decision to bail out the socialist, welfare countries, along with inflation challenges in China, both of which generate questions on demand for raw materials and other products, which have been putting tremendous pressure on the stock market, and will continue to do so.

All of that is good news for gold and some gold mining companies, who will ride upwards with the price of gold, although they will also partake in the inevitable corrections as well.

Flight from Gold after Goldman Sachs (NYSE:GS) News

Gold traders dump the yellow metal on Goldman Sachs fraud charges

In an illogical move, traders fled gold after the news that Goldman Sachs (NYSE:GS) was charged with fraud by securities regulators.

The idea that gold is considered a risk in volatile times doesn't make sense, but then traders behave in that manner, although gold investors don't.

Gold futures plunged on the news, dropping by over $24 an ounce as of this writing.

Most fears over gold are in the short term and not the long term, as uncertainty over what else may emerge in the banking industry has gold traders flustered for now.

Gold Trading Range Remains Tight

Gold Trading Range

With the markets closing Friday because of the Easter holiday, gold trading is expected to be low, which under normal conditions could mean tremendous volatility during the week.

This is because smaller trades can move the markets more when there is less volume.

Even so, with the ups and downs, in the end the gold trading range should remain and end the week tight, even if there are a few big moves throughout the week.

US Gold Futures Up Slightly

U.S. Gold Futures

U.S. gold futures ended the day up a little, as it finished the day on the COMEX at $1,108.20 an ounce, a slight 10 cent increase.

Currencies moved very little, giving little indication or guidance for gold.

A number of gold traders said the possibility of China monetary tightening could move the gold market going forward.

U.S. Gold Futures