Gold's 12th year of consecutive gains in 2012 was greeted with bullish forecasts of even bigger gains ahead. But in reality, those advances have been masked by underlying weakness.
Although the world's largest gold ETP, the SPDR Gold Shares (GLD), rose by 6.60% last year, it's been in a significant downturn for more than a year and a half.
Since mid-August 2011, GLD has fallen by -16.33%. For Q1 2013, gold posted its first consecutive quarterly loss since 2001.
Can gold bounce back?
Decelerating Asset Flows
The velocity of money flows into gold exchange-traded products (ETPs) has slowed.
Since the start of the year, gold-backed ETPs experienced their largest outflows ever, declining by 7.2% to 70.66 million ounces, according to Reuters data. Assets in GLD are down 12% to 39.3 million ounces.
High profile investors like George Soros and Louis Moore Bacon have their exposure to gold via their investment vehicles. Late last year, Bacon's investment firm sold its entire stake in GLD while Soros Fund Management reduced its GLD position by 55% to 600,000 shares. Bucking this trend has been the world's banks.
In Q4 2012, global central banks accumulated 145 tons of gold, the second-highest quarterly total since the height of the credit crisis in Q2 2009. But this still hasn't been enough to push gold prices higher.
Are Miners a Warning Sign for Gold?
One of the few sectors within the stock market now sustaining sizable losses are gold mining stocks (GDX). The sector has lost more than -22% over the past year and is down -18.41% year todate.
On Feb. 14, via our Weekly ETF Pick update, we wrote about a high probability setup in the precious metals category:
