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:

“Despite a rising stock market, the Market Vectors Gold Miners (GDX) has lagged both the broader U.S. stock market along with the SPDR Gold Shares (GLD) by a very significant margin. The current downtrend for mining stocks is still in place.

“Furthermore, a double-digit slide for gold would likely translate into a 20%-plus loss in mining stocks. This scenario offers some big upside potential for bears. Buy the Direxion Daily Gold Miners Bear 3x Shares (DUST) at current levels.”

Our February DUST trade gained 29.6% in the week after we recommended it.

And our GDX put options alert in that same report are still open and have already generated a 100%-plus gain.

Put another way, the buy-and-hold gold trade isn’t working.

While it’s true that gold equities aren’t the same as physical gold, the subpar performance for both is a red flag for bulls.

Will GLD follow GDX down the tubes? Recent price action tells us almost everything we need to know.  

Relative Weakness

Upon closer analysis, the only real strength in the precious metals sector right now has been with tinier markets like platinum (PPLT) and palladium (PALL).

On a relative performance basis, both metals are outperforming gold and silver. Despite gold’s recent performance woes, its longer-term uptrend has yet to be broken.

When GLD was launched in 2004, gold bullion traded around $450 per ounce vs. $1,550 today. That’s a 244% gain, as goldbugs rightfully point out.

What about now? As everyone should know, history isn’t prologue. And if gold breaks below key price support levels, it will only re-confirm that lower prices are still ahead.