Last week, gold gains were driven by the return of the “mystery buyer” in Asia and amplified by algorithmic traders, according to Daniel Ghali, senior commodities strategist at TD Securities.

Ghali explained that the gold market environment has changed since the beginning of the year, with a weakening US dollar and interest rates that could lead to more buying. However, if the dollar continues to strengthen, this could catalyze buying activity by “mystery buyers” in Asia, which include both retailers and institutions and central banks.

Ghali also noted that trend-following algorithms have become the dominant force in commodity markets, contributing significantly to gold's recent gains. However, the current pressure on gold prices is due to deleveraging (reduction of debt by a company or individual) by quantitative funds and risk aversion in the markets.

Finally, Ghali mentioned that the strength of the US dollar, driven by Federal Reserve policy, has led to a depreciation of Asian currencies, which has reactivated buying activity in those markets. Despite this, Ghali warned of a possible exhaustion of buying in the near future.

Ernesto Hoffman, Kitco