Gold prices plummeted Friday, at one point tumbling 15 percent from the level of three weeks ago, as investors started buying stocks and, to a lesser extent, euros but kept selling precious metals.

The virtual collapse in the safe-haven investment - it hit a seven-week low and was headed towards its steepest weekly fall since late 2008 -- started Wednesday when the Fed said it would lengthen the maturity of its balance sheet to suppress long-term interest rates.

In combination with a downbeat economic outlook the Fed issued in announcing Operation Twist, as the maturity change was dubbed, markets swooned, with stocks and precious metals plunging as investors fled to dollar assets like U.S. Treasuries.

Stocks began recovering Friday and the dollar gave up some of this week's gains, but the damage has been done to precious metals.

Since Operation Twist, gold has fallen more than 9 percent, even dropping below $1,700 for the first time since Aug. 5. Silver is solidly in bear territory: Since Wednesday it has dropped 25.01 percent.

Some of the selling was large institutions booking profits ahead of the third quarter's close; other selling stemmed from the need to raise cash to cover losses elsewhere; part of it was retail investors capitulating.

The metals market suffered from a massive, no-holds barred flight from risk to cash and the U.S. bond and dollar market, Tim Murray, general manager of precious metals marketing at Johnson Matthey, told MarketWatch.

Longer-term, gold's fundamentals remain strong, analysts said.

For now though gold has to roll with the masses, as markets show their disappointment in the Fed's 'Operation Twist,' UBS strategist Edel Tully told clients. But the confidence-seeping sentiment that now permeates at a deeper level will at some point translate into a higher gold price. In these volatile times, gold's journey is not going to be a smooth one.

Gold on the New York futures market closed down $101.90 at $1,639.80, a loss of 5.85 percent from the previous day's close. Gold for immediate delivery fell $12.90 to $1,652.98.

Silver on the New York futures market fell $6.48 to $30.10, a loss of 17.71 percent from the previous day's close. Silver for immediate delivery declined $1.42 to $30.75.