ETF's have been called the People's Central Bank. They are the world's third largest gold holder against the US and Germany. Still, money is starting to flow out of gold as investors seem to be giving up on this store of value.
Some are calling this the end of the gold bull market. There seems to be a good reason for leaving gold if you focus on inflation. There is no strong inflation from the QE programs; consequently, there is less reason to hold gold as an inflation hedge. Even the threat of a bank run in Cyprus has not caused gold prices to move higher. The floor seems to be around $1660, but it is unclear what will move it higher. The market has soured on gold given the nice run on stocks, but it is not clear these equity gains will continue. Even without a equity forecast there are reasons to hold gold.
It is early to exit gold based on recent price declines and outflows. Further weakness provides a buying opportunity. With financial repression, banking problems, more QE, and the potential for higher inflation expectations, gold may still be a good investment. The sensitivity to these events has declined because we have not seen as much follow-through after the strong gold gains. The current rest may set-up the market for new gains if there is a flight to quality catalyst.