Price Drivers 

Wednesday saw purchases of 7.496 tonnes in some serious buying into the holdings of the SPDR gold ETF [GLD] but none into the Gold Trust gold ETF leaving their respective holdings at 806.348 tonnes and 163.63 tonnes. This is the end of the fourth week of no sales from the U.S. based gold ETFs in which time we have seen the start of some solid buying of gold into these funds. As we forecast, when such buying returned U.S. buyers would have to pay up to get hold of that gold, because the gold it sold in 2013 has gone east, never to return. We expect both short covering and new purchases of physical gold to be a feature of New York today. 

Meanwhile Chinese buying continues irresistibly as we saw overnight when it took the price higher. A feature we expect to see is a change from the usual, ‘break through resistance, then fall back to support before moving higher’. With Chinese buying barreling on, ‘stale bull’ selling will be gobbled up, pushing prices up quickly. This was shown in the last day, where we said yesterday, “Some more time may be needed before gold makes a successful assault on $1,300.” That time reduced to less than a day and has taken $1,300 in one bound.  

Gold investors should now factor in, that a fundamental shift in the dominance of the gold market from the U.S. and London to China is already underway. It is part of a fundamental change in the structure of the global economy. We forecast that there will be shift in the dominance of the short-term, speculative tendency of the gold market [in the U.S.] to the dominance of the long-term buying of gold, which will become a feature of the gold price in the resumption of its upward trend. Consequently swings in price will be smaller and quicker as the risks for speculators on the short side will rise somewhat. 

The successful gold investor will be the long-term holder trading only on major corrections, if and when they come. We will have to put on Asian thinking about gold.

Silver – The silver price is now outperforming the gold price but will remain more volatile than gold.

Julian Phillips is the founder of and