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The Fed’s mixed signals on initiating another round of QE also have spooked gold investors. In the wake of QE2, GLD soared more than 50%, vastly outperforming stocks.

But since the market bottomed last October 3, the Dow has rallied 24%, the S&P has advanced 27%, and the Nasdaq Composite has surged 30%. GLD has done literally nothing.

If the trend continues, this might suggest a scenario of slowly recovering global economies, gradual deleveraging, and little inflation in the real world—plus a firmer dollar. All in all, it would be a recipe for higher share prices but continued weakness for gold.

That’s where Williams says the ETFs could have problems. GLD alone has attracted more than $70 billion in assets, so it has become the vehicle of choice for investors to own gold.

Hedge-fund titans who bought GLD with great fanfare a couple of years ago have lightened up. George Soros sold nearly all his GLD holdings last year, though he has bought some back, presumably at lower prices.

John Paulson, who had a rough year in 2011, has pared his big holdings in GLD, while hedge funds run by Steven Cohen, Jeff Vinik, Eric Mindich, and Paul Tudor Jones also cut back, according to Bloomberg.

• Read about why no guru, even John Paulson and Bill Gross, is too big to fail.

But Williams worries about what retail investors would do if gold takes a tumble.

“These gold ETFs haven’t been bear-market tested. What will happen when these investors exit?” he asked. “They tend to vote with their feet very quickly.”

And gold’s biggest fans are deeply attached to it. “Gold is one of those emotional asset classes,” Williams told me. “These folks are fanatics about gold. There’s a class of investors who are into gold because it’s a religion, a cult, a political statement.”

I remember when people just loved stocks in the late 1990s. If you dared question the valuation of Cisco Systems (CSCO) or JDS Uniphase (JDSU) back then, they were ready to burn you at the stake.

Now, unfortunately, the true believers in gold have gotten their investment decisions all wrapped up with their politics and their fears for the future.

But what if, just what if, the US and world economy are on the mend in ways we can’t fully appreciate now? What if, for instance, circumstances evolve where we can actually reduce the deficit? Likely? No. Possible? Certainly.

We didn’t foresee the transformation in Asia in 1997-1998, nor did people grasp the sea change coming when Jimmy Carter appointed Paul Volcker as Fed chairman and Ronald Reagan was subsequently elected president.

Volcker’s monetary policy, plus the lower taxes and change in direction brought about by President Reagan, broke the back of inflation and set the stage for renewed prosperity and an 18-year stock market boom. They also killed the last bull market in gold, which suffered through a lost two decades until its revival in 2001.

I don’t know if this gold bull market is coming to an end now. I still own a small position in GLD, and I’m not selling. But those of you who have 40% to 50% of your portfolios in gold and silver might want to take some profits.

As Williams puts it: “You should never marry or fall in love with your investment”—even if you can turn it into a band of gold.

Howard R. Gold is editor at large for MoneyShow.com and a columnist at MarketWatch. Follow him on Twitter @howardrgold and read his political blog at www.independentagenda.com.