The Gold Price May Be Driven By The Physical Market in 2024

“In addition to monetary policy, geopolitical uncertainty is often a key driver of gold demand, and in 2024 we expect this to have a pronounced impact on the market. Ongoing conflicts, trade tensions, and over 60 elections taking place around the world are likely to encourage investors to turn to gold for its proven track record as a haven asset.” 

– World Gold Council, Blistering Central Bank Buying

Which Central Banks Are Buying Gold?

The funny thing about that „blistering central bank“ gold buying is that it’s coming from the eastern hemisphere (BRIC/Asian/SCO) central banks, including the central banks of OPEC nations. 

The physical gold market is starting to reject the efforts of the LBMA and COMEX to push the price of gold (and the price of silver) lower. 

In addition, Chinese buyers have been paying a significant premium over the spot price as set on the LBMA:

The Gold Price Remains Resilient

The price of gold in London and New York has remained firmly above $2,000 an ounce since late November, despite the more hawkish tone concerning interest rates from the Federal Reserve – and the three attempts to push the price below $2,000 since early December.

Eastern hemisphere markets include entities/investors accumulating physical gold (and silver) that is either stockpiled for wealth preservation – particularly against the US dollar – or refined into jewellery. Across India and China, this is the preferred retail form of investing by everyday people in gold and silver.

Eyes on Western Gold Markets

The World Gold Council released its Gold Demand Gold Trends report a few weeks ago. The report concluded that total gold demand hit an all-time high in 2023. As an example of the massive amount of physical demand in China, gold withdrawals at the Shanghai Gold Exchange hit 271 tonnes in January, the highest level on record. 

Crucially, withdrawal on the SGE is an actual withdrawal of the physical gold that passes through the SGE – contrast this with the COMEX or the LBMA. When gold is delivered on these „physical“ gold exchanges, it’s typically „delivered“ to hedge funds or other COMEX futures and LBMA forward investors who leave their „delivered“ gold in the COMEX or LBMA respectively. 

The COMEX, which is the most egregious example of this „fractional“ bullion allocation system, will eventually collapse when entities who took „delivery“ look to remove their „delivered“ gold or silver from the COMEX. This was close to happening in 2020 when the COMEX and the LBMA conjured a bogus gold contract that incorporated the LBMA’s alleged gold inventory with the COMEX’s inventory. 

I don’t know when this chart is going to break out – no one knows – but the chart of gold looks potentially explosive:

Although gold has run from $1,620 to $2,034 (an ounce) from November 2022 to the time of writing, the RSI and MACD are technically more bullish. 

When that nearly 4-year handle on a nearly 4-year cup/handle formation breaks higher, look out above!