The flight instructor (CFI) said he was instructing the student in how to judge a straight-in approach and landing to a dock with minimal taxiing required. During the approach, the CFI determined that the student was overshooting the desired touchdown point, so he told the student to make a go-around. A normal go-around was initiated in addition to a right turn. After 8 to 10 seconds on the crosswind leg, another right turn was started to take the aircraft out toward the mouth of the bay. The CFI stated that after 2 to 3 seconds in the turn, the aircraft abruptly banked left, lost altitude and the left wing dug into the water. He also stated that the lake was surrounded by hills that rose 3,000 ft or more above the lake level, and that "strong upper level winds, roll turbulence and shifting gusting winds can occur near the shore of the lake." Reportedly, at the time of the accident, the winds were from 240 degs, variable to 290 degs at 10 gusting 15 kts.