Investing.com -- Gold's surge in August was led primarily by investment flows rather than any single catalyst, according to Krishan Gopaul, senior analyst for EMEA at the World Gold Council, who cautioned against pinning the move on the U.S. Treasury's decision to expand its bond buybacks.

Spot gold rallied close to $4,700 an ounce in August, its highest since mid-May. But Gopaul said the buyback announcement, which came late in the month, likely accelerated an existing trend rather than creating a new one, set against a backdrop of debt concerns in the U.S. and elsewhere.

“There are still other key drivers of global prices at play within the market,” Gopaul told Investing.com. “But the buy-back announcement, against a backdrop of debt mountain concerns - in the US and elsewhere - seemed to accelerate an existing trend rather than creating a new one.”

Investment demand has strengthened since July, he said. Global physically backed gold ETFs recorded $3 billion of net inflows that month, reversing two consecutive months of outflows, followed by a further $17 billion in August. Both China and India have shown clearer improvement in investment demand.

"The latest leg of the rally appears to have been led primarily by investment demand, particularly futures positioning and gold-backed ETF inflows, rather than by a sudden acceleration in retail physical demand," Gopaul stated, adding that physical consumer demand likely provided support at the margin.

He characterized central bank buying as an important underlying pillar of the market rather than the principal catalyst for the latest rise, expecting official sector purchases to stay strong this year though below 2025's level.

“It is harder to identify central bank buying as the immediate trigger for a rally taking place over several weeks,” he said. “We would characterize central bank buying as an important underlying pillar of the market rather than the principal catalyst for the latest rise.”

On the outlook, Gopaul said conditions remain supportive but uncertainty and general volatility are likely to impact the wider market for the rest of the year.

“A renewed rise in long-dated real yields, a stronger dollar or a more hawkish-than-expected Federal Reserve would present near-term headwinds,” remarked Gopaul. ”Conversely, further weakness in the US dollar, renewed downward pressure on real yields, continued ETF inflows or an escalation in fiscal and geopolitical risk would be supportive for gold.”