I finally found some time to look at GLD and SLV exchange traded plans (ETP) inventory and price history.
Gold inventory at GLD fell to just below 800 tonnes in the last days of December 2013. The last time GLD has 800 or fewer tonnes of gold was in December 2008 when the price of gold was $780 per ounce. In 2008, the gold bull market was strengthening which eventually pushed prices over $1,800. 2013 is the reverse. Gold buyers are so bearish that they wish to own only 800 tonnes even with the price at $1,200.
Remember only Authorized Participants (AP) in GLD, such as HSBC, Goldman, JP Morgan, Scotia, Deutsche, Citi, and UBS are allowed to create or redeem baskets of 100,000 GLD shares in exchange for bullion. The Trust is responsible to manage inventory so that the price of GLD shares tracks that of gold.
Interestingly, silver inventory at the SLV Trust has remained flat while price dropped during the last year. It seems that silver bears are not as pessimistics as gold bears. There are many other possible causes of the disparate behavior of GLD and SLV inventory. What's your theory?