To start, he noted that the buying that took gold to the US$2,050 or US$2,100 level was largely high-quality purchases from central banks, which have been adding the yellow metal to their coffers at a strong pace.

‘Central bank buying is quality because it’s unlikely to be sold if there’s a significant price correction. It’s for the very long term — think multi-generational,’ Norman said. He added that Chinese buying also supported that move.

‘(Chinese) retail buying is strong, central bank buying is strong. Institutional buying is strong on exchange-traded funds. Added to that, China is having its Costco (NASDAQ:COST) moment in the sense that Gen Z and Millennials are buying gold — at high premiums might I add — in gold beans,’ Norman continued.

All of those factors were in place earlier this year, but on March 1, when gold started to take off, something changed.

‘It was clear that there was a very significant large player in the market, and they were driving it massively higher,’ said Norman. ‘Spoiler alert — it was more China. Even more than we expected.’

He determined that the buying was coming from speculators on the Shanghai Futures Exchange (SHFE).

‘The Chinese threw themselves speculatively at gold. They took it to an all-time high of US$2,430, US$100 above where we are now. And then the market corrected lower. Now, the reason for that is the exchanges, particularly the Chinese exchanges, (the Shanghai Gold Exchange) and SHFE, significantly increased initial margins, effectively putting a speed bump in terms of trading gold. The COMEX did the same, by the way, as well at the same time. The exchanges are saying these markets are too hot, calm down. We’re going to make it more expensive for you to deal in them.’

Once that happened, Chinese traders became less interested and the gold price pulled back.

‘In a nutshell, if you like, gold has moved higher, significantly higher, to around US$2,100, on quality buying. The last US$200 on top of that arguably is of a vulnerable nature because it’s futures buying,’ he said.

Watch the interview above for more from Norman on what’s going on with gold right now.

Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.