Its been three long years for the 'net' speculative futures, options, and ETF holders of gold who have been reducing their exposure to the precious metal. Three long years of hearing day after day that "gold's day is done" or some other perspective that stands in the face of reckless government deficit expansion and morose monetization by all the world's central banks. Three long years and hedgies are the least exposed in years to GLD. Three long years because, as the chart below shows extremely clearly, they simply don't appear to count at the margin. The total disconnect as paper gold positioning - ETF holdings and net futures/options speculative positioning - has had no correlation with the price of Gold since August 2010 when the world started anticipating QE2 (and beyond).
With global central banks expanding their balance sheets and many governments still increasing their gold holdings, perhaps this is the clearest indication of a rotation from paper gold to physical we can see - even as prices fall in the short-term 'strange divergence' from demand.
Furthermore, it appears the current slowdown is similar to each of the past surges post major Fed action... (S&P[green] versus Gold[orange] since QE2)
...and arguably, as central bank balance sheets remain bloated (though in the short-term thanks to LTRO repayment the gross USD-based balance is fading marginally) - the fact that the Fed has promised QE4EVA implies the ever-expanding growth of fiat will support gold prices implicitly.
It appears gold has front-run Central Bank exuberance a few times since QE2 - and each time pulled back before embarking on its inexorable rise higher. With the Fed alone adding $1tn this year and China yet to report up-to-date data for January and February, we suspect the 'green' line will start dragging the 'black' line higher once again - especially with European risks flaring once again and the desire to repay LTRO funds wearing off.