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According to IndexUniverse, short interest in the world's biggest exchange-traded gold bullion fund spiked 83% in April. Assets in the SPDR Gold Shares ETF (NYSEARCA:GLD) fell almost 19% last month, followed by another $1.25 billion in outflows in May. GLD has bled more than $14.5 billion in assets this year. GLD's short interest amounts to almost 8 percent of the ETF's float in April, almost double March's percentage.

Gold may fall further if Paulson and other big funds continue to sell, says a story from Marketwatch. In fact, John Paulson's gold fund has lost 27% in April and is down a whopping 47% for the year, according to another story from Zero Hedge -- which illustrates what can happen when an asset goes against big leveraged portfolios.

In another story, Steve Cucchiaro of Windhaven Investment Management, which was the eighth-largest holder of GLD in 2012, said he has sold out after being overweight in gold for about a decade.

One of the reasons he sold coincides with what I have written in previous articles. "The idea that short-term speculators would begin to lose patience with the lack of new highs in gold, began to sell our overweight position in February," said Cucchiaro. He also said he is waiting for a much bigger correction before he decides to dip into gold again, assuming the fundamentals of gold warrant such a move. He said he will see what the sentiment for gold is around the $1300 level before deciding to make a move again.

Remember, it was gold and commodity ETFs beginning in early 2000 that were responsible for raising the price of gold near $2000, and it will be the unwinding of all these commodity funds that will bring gold down again.

The more players unwind the gold trade, the lower prices will go. For those that think demand will kick in, let me remind you that about 40% of current demand is for investment purposes. If one strips out investment demand from the gold picture, then one has to ask where will demand for gold come from if investors decide gold isn't an appealing investment or speculation play anymore.

I'm not saying that investment demand for gold will go away anytime soon, but demand might go down by a lot. And the more gold corrects, the less appealing it will be for individuals and institutional investors to buy and hold.

Currently, leveraged speculative portfolios are exiting the gold trade. Even if their assumption for gold turns out to be correct longer term, today they are being forced to sell to remain solvent. "The market can remain wrong longer than you can remain solvent" was never more true than for what is happening today in gold.

I, for one, think this forced selling will continue in gold and the commodities space will become less appealing for investors longer term. Like Rome, the gold trade did not emerge in a day, but over a decade. I think as time goes by, we will see more and more big gold players exiting gold and the commodity space in general.

How low gold can go is anyone's guess, but more and more analysts are talking about gold going lower than $1300. My extreme low target for gold continues to be around the $1000 level for the time being.

If and when gold reaches that point, I will reconsider the situation and scout around for opportunities in the space. Until then, or until some new piece of news changes the current dynamics for physical gold, I continue to think gold is going lower.

Strange enough, because stocks are smarter than the metal itself, I actually think that most of the major gold producers -- that have been sold off to the max -- might actually represent an opportunity at current prices, even if gold goes much lower.

As such, I will reiterate what I said in my previous gold article: if you know how to analyze gold stocks, Barrick Gold (NYSE:ABX), Newmont (NYSE:NEM), Goldcorp (NYSE:GG), Silver Wheaton Corp. (NYSE:SLW) and Yamana Gold (NYSE:AUY) are worth looking at, at least from a deep discount value perspective.

Source: Gold: Over-Leveraged Portfolios Unwinding, Watch Out Below