LIVE Gold Prices $  | E-Mail Subscriptions | Update GoldSeek | GoldSeek Radio 

Commentary : Gold Review : Markets : News Wire : Quotes : Silver : Stocks - Main Page >> News >> Story  Disclaimer 
Latest Headlines to Launch New Website

Is Gold Price Action Warning Of Imminent Monetary Collapse Part 2?
By: Hubert Moolman

Gold and Silver Are Just Getting Started
By: Frank Holmes, US Funds

Silver Makes High Wave Candle at Target – Here’s What to Expect…
By: Clive Maund

Gold Blows Through Upside Resistance - The Chase Is On
By: Avi Gilburt

U.S. Mint To Reduce Gold & Silver Eagle Production Over The Next 12-18 Months
By: Steve St. Angelo, SRSrocco Report

Gold's sharp rise throws Financial Times into an erroneous sulk
By: Chris Powell, GATA

Precious Metals Update Video: Gold's unusual strength
By: Ira Epstein

Asian Metals Market Update: July-29-2020
By: Chintan Karnani, Insignia Consultants

Gold's rise is a 'mystery' because journalism always fails to pursue it
By: Chris Powell, GATA


GoldSeek Web

The Gold Price Driver

 -- Published: Tuesday, 3 April 2018 | Print  | Disqus 

By Craig Hemke

There continue to be all sorts of purported analysts out there who insist that the price of gold is determined through physical supply and demand. These folks cling to the arcane notion that somehow fundamental factors are the key determinant of the daily price.

Nothing could be further from the truth.

Whether it's organizations like the World Gold Council, sell-side bullion bank scribes or internet prognosticators, the vast majority of these "analysts" believe that the primary driver of the gold price is physical supply and demand. They cite global mine supply, GLD flows and sovereign demand as their primary sources for this analysis.

But since 2014, we've argued that the primary driver of price on a daily basis is instead the HFT reaction to changes in the single forex pair USDJPY. Below is one of the original charts we posted back in November of 2014. Note that prior to The Great Financial Crisis of 2008, there was no clear correlation between the yen and gold. However, since then, and with the now-present central bank management of nearly every "market", the correlation is obvious.

If we bring this chart up-to-date and look at just the past four years, we see the result below. Note that the inverse of the USDJPY is in candlesticks, and the continuous COMEX gold contract is displayed as a blue line.

Upon closer inspection, however, it appears that a major shift has occurred in 2018. Since late January, there has been a significant divergence in the yen-gold correlation. While the yen has steadily appreciated against the dollar, the price of COMEX gold has been flat and has not kept up. See below:

And it is as if the Bank and/or Spec HFT computers have been reprogrammed. Where the yen-gold correlation had been tight on a nearly tick-for-tick basis, the price of COMEX gold now closely correlates with the dollar index, or perhaps more specifically the euro, instead. The chart below shows the euro in candlesticks and the continuous COMEX gold contract as a blue line.

IF a change has truly taken place, and IF the dominant algos have now pegged the price of COMEX gold to the dollar index or euro, then the single most important driver of the COMEX gold price in 2018 will not be mine supply, sovereign demand or ETF flows.

Instead, the single most important factor will be the general trend in the dollar. If the dollar recovers and rallies, the HFTs will sell COMEX gold exposure and price will fall. If the dollar continues to slide, the HFTs will continue to seek COMEX gold exposure and price will rally.

Back in early January, we laid out our thesis for dollar weakness in 2018, and we urge you to read it now if you missed it back then:

In the end, it is vitally important that you understand that "the markets" in 2018 are not the same as they were in 2008 or 1998. Instead, "markets" are primarily controlled by High Frequency Trading computers whose algorithmically-based programs swap positions at the speed of light.

As this pertains to the precious metals, it's clear that fundamental factors such as physical supply and demand have little to no impact on price. Only a recognition of this basic fact gives you an understanding of what drives price on a daily or weekly basis.

Our Ask The Expert interviewer Craig Hemke began his career in financial services in 1990 but retired in 2008 to focus on family and entrepreneurial opportunities. Since 2010, he has been the editor and publisher of the TF Metals Report found at, an online community for precious metal investors.

The views and opinions expressed in this material are those of the author as of the publication date, are subject to change and may not necessarily reflect the opinions of Sprott Money Ltd. Sprott Money does not guarantee the accuracy, completeness, timeliness and reliability of the information or any results from its use.


| Digg This Article
 -- Published: Tuesday, 3 April 2018 | E-Mail  | Print  | Source:

comments powered by Disqus


Increase Text SizeDecrease Text SizeE-mail Link of Current PagePrinter Friendly PageReturn to >> Story

E-mail Page  | Print  | Disclaimer 

© 1995 - 2019 Supports

©, Gold Seek LLC

The content on this site is protected by U.S. and international copyright laws and is the property of and/or the providers of the content under license. By "content" we mean any information, mode of expression, or other materials and services found on This includes editorials, news, our writings, graphics, and any and all other features found on the site. Please contact us for any further information.

Live GoldSeek Visitor Map | Disclaimer


The views contained here may not represent the views of, Gold Seek LLC, its affiliates or advertisers., Gold Seek LLC makes no representation, warranty or guarantee as to the accuracy or completeness of the information (including news, editorials, prices, statistics, analyses and the like) provided through its service. Any copying, reproduction and/or redistribution of any of the documents, data, content or materials contained on or within this website, without the express written consent of, Gold Seek LLC, is strictly prohibited. In no event shall, Gold Seek LLC or its affiliates be liable to any person for any decision made or action taken in reliance upon the information provided herein.