August was a volatile month for precious metals. In the first week of August, gold soared to a new record of $2,075 and silver neared the $30 threshold for the first time since early 2013. But metals slid over the next few weeks as pressure from a rising US dollar and record setting equity prices began to take its toll on metals. Gold finished nearly where it began the month at $1,968.10, up 0.1%. Silver, which many consider to be undervalued in relation to gold, fared better, rising 17.5% to finish at $28.43. Platinum and palladium finished August up 2.4% and 6.4% respectively.
Metals began the month strong coming off the heels of a record-breaking July. Gold and silver surged 5% and 22% respectively during the first week of August and seemed unstoppable. A rising US dollar and news of an effective COVID-19 vaccine out of Russia quickly swung momentum away from haven assets and metals plummeted. On August 11, gold fell over $120, its worst single day performance since 2013 and silver dropped over $4.
Stocks had a strong August with all three major indices rising for the fifth consecutive month. The Dow rose 7.6% which was its best August performance since 1984 and the S&P 500 finished up 7.0%, hitting a record high in the process. The Nasdaq outperformed the others as tech stocks continued to dominate, and finished August up 9.6% which was its best monthly performance since 2000.
While stocks outperformed metals in August, increasingly tense relations between the US and China and ongoing negative economic data later in the month helped boost metals. Additionally, the Fed changed its inflation target from 2% to an ambiguous target rate higher than 2% in an attempt to reach full employment and price stability in a time of long-term low inflation. In other words, rates will likely remain close to zero well into noticeable economic recovery which bodes well for metal prices heading into the fall.