After an impressive 12 year bull-run, gold has been in the bearish territory for the past few months. Gold price has gone down ~7% in the last 13 weeks and ~5% year-to-date.

As a result of decline in investor interest, the most popular gold ETF SPDR Gold Shares ( GLD - ETF report ) has seen massive outflows recently, while most of the popular US stock funds have gathered assets this year.

Among the main reasons for decline in gold price:

· Many investors are concerned that QE3 may end earlier than expected

· US economy and some of the major emerging economies seem to be on the recovery path

· Some high-profile investors like George Soros reduced their gold holdings

· US Dollar has strengthened recently

· There is no sign of inflation risk in most developed countries despite massive monetary easing

Fed’s chief recently clarified that the Fed has no plans to end easing anytime soon, which resulted in gold price recovering a bit. Further, renewed worried over Europe and the impending sequester should be positive for gold. (Have we seen the bottom in gold ETFs?)

Also, central banks, mainly in the emerging countries have been adding to their gold reserves. According to the latest report from the World Gold Council, central bank purchases were up 17% in 2012 and were at their highest level since 1964.

Despite gold’s disappointing performance of late, I continue to believe that gold should be a part (~5% to 10%) of any well diversified portfolio. Please share your views.