'Gold Is Toast!' Why It Could Drop to $500: Pro

Gold is a "classic bubble" and could go all the way down to $500 an ounce, Fortress Investment's Michael Novogratz said on CNBC Wednesday.

"I personally think gold is toast," said Novogratz, chief investment officer of the Fortress Macro Fund, part of the $55 billion hedge fund group. "We peaked out at $1,900 two years ago."

Gold prices have dropped 27 percent from those lofty levels—plunging through $1,400 in mid-April for the first time since early 2011. Despite moving above that key level for a while since then, prices were trading around $1,393 midday Wednesday.

(Read More: Gold Falls to Three-Week Lows on Stronger Dollar)

In a "Squawk Box" interview, Novogratz said a recent chart of gold prices over those of the Nasdaq or Japan's Nikkei—back when those stock indexes crashed—show that "once bubbles pop, they go all the way down."

"It wouldn't shock me to see gold back at $500," he said.

Novogratz also talked about the stock market—saying it could drop 10 to 15 percent when the Federal Reserve begins to pullback on its bond-buying program. But that won't happen for a while and stocks should continue to rise in the meantime, he added.

(Read More: Taper by 'Fat, Dumb and Happy' Fed Will Hurt, Novogratz Says)

By CNBC's Matthew J. Belvedere. Follow him on Twitter @Matt_SquawkCNBC.