sync iPhone to new i tunes library

In order to free up space on my IMac, I have moved all my itunes music to a portable hard drive.  I ended up deleting the itunes library folder at the same time and consequently changed my defaulted itunes to the library folder within the hard-drive (which is attached to the computer at all times).

When launching itunes from the icon on the desktop, it launches the itunes within the hard-drive.

My issue now, is that I cannot transfer any of the music purchased in my i-phone to my i-tunes as it states the phone is synced to another library.

Is asks whether I want to sync it to the new one but I gather I will lose everything currently on my phone?

First, if I do proceed to sync it will it from now on sync to this itunes library and is there any way I can attempt to save the stuff already on it? Including music I've purchased from the i-tunes store and all my contacts?