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FM IN-DEPTH: Correction Playbook—Gold and Precious Metals

Published Thu, Aug 4 20116:55 PM EDTUpdated Thu, Aug 4 20117:43 PM EDT

By Thursday’s close, all the bulls could do was curl up and lick their wounds after a free fall in stock prices sent investors running for the exits.

In fact, by the end of trade, Wall Street had put in its worst day in over a year with the S&P more than 10% lower from the May 2nd high of 1370 – that officially puts the US stock market in correction territory.

Whenever markets make sharp moves such as this, Fast Money always tries to bring you insights from a wide range of pros that may help you navigate the chaos and confusion.

Following are the gang’s thoughts on ... goldand precious metals. Or click below for the impact on another area:

Impact on Gold and Precious Metals

Gold recoiled from a record high in heavy volume on Thursday, as mounting recession fears fed a global stock market maelstrom that forced investors to liquidate bullion profits to cover losses elsewhere.

In an abrupt midday reversal, gold slid as much as $40 from an all-time high. Silver plunged 7 percent to $38.76.

Joe Terranova thinks it looks like the dollar may be reversing from its decline after its monumental day Thursday. And if the dollar continues to climb higher, he said, “I believe the gold, the precious metals trade is over.”

He also thought that the plunge in sliver mid-day was due to algorithmic trading that forced the tape lower and lower. “It’s a game of leap frog.”

Anthony Scaramucci, Managing Partner at SkyBridge Capital and “Fast Money” contributor, said if Terranova is right about gold, it could mean trouble for hedge funds.

While most hedge funds de-risked in June, many of them still have about 5 to 10 percent exposure to gold as a defensive hedge.

“If the dollar starts rising and gold starts fading, a lot of these hedge funds are going to get hurt there,” he said. That implies there could be further selling pressure in the gold market.

However, he also thinks the hedge fund industry has also been a bit ahead of the crisis.

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Trader disclosure: On Aug 4, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Seymour owns (AAPL); Seymour owns (BAC); Finerman owns (AAPL); Finerman owns (BAC); Finerman owns (JPM); Adami Owns (AGU); Adami Owns (C); Adami Owns (GS); Adami Owns (INTC); Adami Owns (MSFT); Adami Owns (NUE); Adami Owns (BTU); Terranova owns (VRTS); Terranova owns (LQD); Terranova owns (IBM); Terranova owns (FCX); Terranova owns (CVI); Terranova owns (AAPL); Terranova owns (GS); Terranova owns (GOOG); Terranova owns (XOM)

For Karen Finerman
Finerman’s firm owns (AAPL)
Finerman’s firm own (BAC) leaps
Finerman’s firm owns (JPM) stock and (JPM) leaps
Finerman's Firm Is Short (IWM)
Finerman's Firm Is Short (MDY)
Finerman's Firm Is Short (SPY)
Finerman's Firm Is Long S&P 500 Puts
Finerman's Firm Is Long Russell 2000 Puts

For Joe Terranova
Terranova is Chief Market Strategist of Virtus Investment Partners, LTD
Virtus Investment Partners Owns More Than 1% Of (ABAX)
Virtus Investment Partners Owns More Than 1% Of (AMKR)
Virtus Investment Partners Owns More Than 1% Of Building Materials Holdings
Virtus Investment Partners Owns More Than 1% Of (CASS)
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Virtus Investment Partners Owns More Than 1% Of Sun Pharmaceutical Industries Ltd
Virtus Investment Partners Owns More Than 1% Of (DBV)
Virtus Investment Partners Owns More Than 1% Of (RLI)
Virtus Investment Partners Owns More Than 1% Of (XLB)
Virtus Investment Partners Owns More Than 1% Of (XLV)
Virtus Investment Partners Owns More Than 1% Of (XLP)
Virtus Investment Partners Owns More Than 1% Of (XLE)
Virtus Investment Partners Owns More Than 1% Of (XLF)
Virtus Investment Partners Owns More Than 1% Of (XLI)
Virtus Investment Partners Owns More Than 1% Of (XLK)
Virtus Investment Partners Owns More Than 1% Of (XLU)
Virtus Investment Partners Owns More Than 1% Of (SUBK)
Virtus Investment Partners Owns More Than 1% Of (WDFC)
Virtus Investment Partners Owns More Than 1% Of (YDNT)
Virtus Investment Partners Owns More Than 1% Of Domino's Pizza UK & IRL PLC

For Brian Kelly
Accounts Managed By Brian Kelly Capital Own (TLT) calls
Accounts Managed By Brian Kelly Capital Own (GLD) calls
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Accounts Managed By Brian Kelly Capital Own (VIX) calls
Accounts Managed By Brian Kelly Capital Own (SDS)
Accounts Managed By Brian Kelly Capital are short (UGA)
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Accounts Managed By Brian Kelly Capital are short the Euro
Accounts Managed By Brian Kelly Capital are short the Swiss Franc

Jens Nordvig
** No disclosures

Chris Whalen
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For Anthony Scaramucci
SkyBridge Capital Is A Fund Of Funds Manager
Funds Held May Or May Not Own The Recommended Securities
Scaramucci Is One Of 8 National Finance Chairs For Mitt Romney Campaign
Scaramucci held a fundraiser for Mitt Romney

CNBC.com with wires.