Gold Surges 15% in August, Shattering Expectations

August has been an exceptional month for gold, with prices surging 15% from the start of the month. This breakout is not only impressive but also significant in terms of historical context, making August one of the best months for gold since the dollar-gold standard was severed in August 1971.

The rally began slowly, with gold eking out a mere 0.1% gain on August's opening trading day. However, sentiment remained bearish following June's price carnage and subsequent challenges to the psychologically important $4,000 support level.

On August 5th, gold rocketed 4.1% higher, with nearly three-quarters of its gains accruing overnight before the ADP private-sector jobs report. This breakout attracted technically oriented super-leveraged gold-futures speculators, amplifying the gains.

The rally continued unabated, with American stock investors taking notice as capital inflows into US gold ETFs accelerated. Gold eventually consolidated high, digesting those blistering gains before surging again on news that the US Treasury would up its buybacks of longer-term bonds, which traders saw as a form of quantitative easing.

Gold prices skyrocketed another 3.9% higher, extending the breakout. A few days later, senior Treasury officials leaked to CNBC that the Treasury could use its colossal Treasury General Account to help fund longer-bond buybacks, further fueling the rally.

The magnitude of gold's huge August is striking, with prices now tracking as one of dollar gold's best months ever since the dollar-gold standard was severed in August 1971. While a symmetrical mean-reversion plunge is possible, the situation birthing gold's August surge suggests it may not be probable.