While the Dow Jones is touching new all-time highs, gold continues to disappoint. In its latest research report, Deutsche Bank AG (ETR:DBK)  noted that gold ETPs have lost over $5.5 billion in February 2013, the largest monthly gold outflow in history. Exchange-traded products (ETPs) include exchange-traded funds, exchange-traded vehicles (US) and exchange-traded commodities (Europe).

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The outflows from gold ETPs have been accompanied by falling gold prices. From December’12 to February’13, stop price of gold has declined by 8 percent. Prices have slumped to about $1,580 per ounce in the last few days, down $100 from a month ago. Is it a striking opportunity to buy on a dip, or just an indication that the bull market is over? Jack Farchy of the Financial Times said that gold is likely to drop much further.

Not so long ago, people continued to buy gold on theory that central banks across the globe are printing money to debase their currencies. Infusion of more dollar by Fed into the economy will lead to a rise in gold prices. Many hedge fund biggies believe it to be true. But the reality? All hedge funds lost money in gold in the fourth quarter of 2012. Seth Klarman’s Baupost Group, Dan Loeb’s Third Point, David Einhorn’s Greenlight Capital Re Ltd., Paul Singer’s Elliott Management, all lost money in gold recently.

The long positions in SPDR Gold Trust (ETF) (NYSEARCA:GLD) declined from $7.271 billion in Q3 to $5.866 billion at the end of the fourth quarter, noted Goldman Sachs Group, Inc. (NYSE:GS). Gold now makes only 0.6 percent of the hedge funds’ long exposures.

As gold continues to lose its charm, hedge funds aren’t just getting out of it. In fact, they are shorting gold. According to data released by Commodity Futures Trading Commission (CFTC), hedge funds and other money managers are holding a record number of bets that prices would fall on the main U.S. gold exchange. The commodity regulator said that fund managers have increased their bets on lower gold futures and options by 33 percent to 65,617. That’s the highest weekly CFTC figure since June 2006.

Shorting gold, which is considered a safe haven when central banks are printing unlimited money to debase the value of their respective currencies, shows contrarian behavior. If fund managers now join the crowd being long gold and ride the trend, they are too late. Many of them have already missed a big part of the upside. So, it may make sense for them to be contrarian, from the reputation point of view as well.

Well, let’s look at it from a different angle. Investors in gold ETFs are generally long-term players, usually trusts and pension funds that hold gold as a part of their diversified portfolio. But the recent sell-off has raised questions whether investors are no longer interested in holding a perceived hedge against currency devaluation? Are they pouring their money into equities amid rising stock market?

ETFs aren’t indulging into any such argument, saying that the recent fall is driven by a tiny part of ETF community that consists of hedge funds and short-term players. They argue that long-term investors will keep faith.

Recently exploration analyst Brent Cook said at the California Resource Investment Conference that per-ounce cost to mine gold was just $300 at the beginning of millennium. Now the cost has shot up to $1500 per ounce. If physical demand of the yellow metal continues at current level of 80 million ounces, Cook said that will cost over $400 billion in capex.