Gold’s recent strength has been powered largely by hedge funds and retail investors, whose inflows have far exceeded official-sector demand. While central bank buying still provides a price floor, it is unlikely to fuel another surge without continued support from private investors, TDS' Senior Commodity Strategist Daniel Ghali notes.

Gold holds firm as fund inflows dominate

"Hedge funds and retail trump central banks in Gold. Over the last months, the evidence suggests that inflows originating from hedge funds and retail participants were multiples larger than the notable bid from the official sector. Since, prices have consolidated, but have refused to break lower."

"Official sector buying, while likely slowing, remains an important anchor for Gold markets after all. Still, it cannot lead to the explosive gains observed over the last months, particularly if other cohorts' participation remains elevated."

"What could turn the tide for fund flows? Retail participants have historically displayed a notable sensitivity to the Fed outlook. Could a more prolonged pause be the catalyst required for larger-scale outflows to commence in precious metals?"