Gold has enjoyed a huge August, soaring in a massive breakout. These remarkable gains are making for one of dollar gold’s best months ever. Yet rallying so far so fast leaves many traders wondering if such a blistering move is sustainable. Extreme swings in one direction often soon mean revert the other way. But gold still remains far from being overbought, and August’s surge is a mean reversion itself from June.
August has long proven a stronger month for gold. It marks the transition from lazy mid-summer trading during vacation season to the markets’ busy season ramping back up as kids return to school. While gold has occasionally suffered some serious selloffs in August, it is generally a good month seasonally. In the modern gold-bull years of 2001 to 2012 and 2016 to 2025, gold has averaged beefy 1.8% gains in August.
That ranks as gold’s fourth-best month of the year, behind only January’s 2.8%, November’s 2.0%, and April’s 1.9%. Back in mid-July when gold languished near deep lows at $3,973, my latest essay on gold’s seasonals concluded gold’s imminent autumn rally “is likely to prove much larger than usual on big mean-reversion buying” because gold had just been hammered to its most-oversold levels in fully 9.6 years!
Gold exited July still down at $4,047, and only managed to eke out a 0.1% gain on August’s opening trading day. Sentiment remained quite-bearish following gold’s carnage in June and multiple subsequent challenges to psychologically-important $4,000 support. On July’s final trading day in the midst of that, I wrote an essay “Gold’s Bullish Falling Wedge”. It analyzed that major bullish technical pattern heralding a breakout.
Indeed a few trading days later on August 5th, gold rocketed 4.1% higher on no news catalyst! There was a modest miss on ADP private-sector jobs ahead of US trading, but nearly 3/4ths of gold’s entire gains that day accrued overnight before ADP. That proved enormous speculator gold-futures long buying, 30.4k contracts in that single Commitments of Traders week ranking in the top 2.9% of all of them since January 1986!
Gold’s falling-wedge breakout attracted in technically-oriented super-leveraged gold-futures speculators to chase gold’s gains, which really amplified them. Gold not only held that outsized spike, but momentum buying continued on balance for the next couple weeks or so. American stock investors sure noticed, as capital inflows into the globally-dominant US GLD, IAU, and GLDM gold ETFs really accelerated adding to gains.
Up 9.2% month-to-date on the 17th, that would’ve already made for a huge August. Gold started to consolidate high, digesting those blistering gains. But
then gold said “hold my beer” as surprising news catapulted it even higher. On the 19th, the US Treasury announced it was upping buybacks of longer-term bonds. Traders treated that like quantitative easing, although the Treasury can’t create money like the Fed.
That was seen as the Trump Administration starting to panic over rising long rates. Benchmark 10-year Treasury yields had surged from 3.96% on the eve of Trump’s war on Iran to 4.72% exiting July! That makes houses less affordable for Americans in a big midterm-election year, and boosts the already-crushing record interest expenses the US government is paying on its eye-popping $40.1t in national debt.
Traders figured the Treasury declaring it would “at least double … buyback operations for longer-dated” Treasuries to “at least $4 billion per operation” was still far too small to manipulate long rates materially lower for long. They seemed to view it as the opening salvo in a much-larger Treasury-buying campaign maybe the Fed would get shanghaied into. So gold rocketed another 3.9% higher that day extending its breakout!
A few trading days later this Monday the 24th, senior Treasury officials leaked to CNBC that it could use its colossal Treasury General Account to help fund longer-bond buybacks! With a staggering balance of $967b midweek, that is like the US Treasury’s checking account. Vast tax payments flow into it, and even-vaster government expenditures flow out. Invoking the TGA was a major escalation in long-rate jawboning.
So by this Tuesday, gold had skyrocketed an extreme 15.3% month-to-date in August! That retreated a little to 13.4% at Wednesday’s data cutoff for this essay. And if those gains hold, August 2026 will prove one of dollar gold’s best months ever since the dollar gold standard was severed in August 1971. It is now tracking as gold’s sixth-best month, only behind some monsters all from way back before August 1982!
The magnitude of gold’s huge August is striking on this longer-term chart. This is updated from my July 31st essay on gold’s imminent falling-wedge breakout, when gold still remained trapped under the upper resistance of that massive technical pattern. When I predicted that breakout, I was thinking something on the order of 3% to maybe 5% at best. So 15% is jaw-dropping even for me, uncomfortably big and fast!
Gold not only shattered its falling wedge’s resistance, but blasted back above both its 50-day and 200-day moving averages! In financial markets the more extreme and anomalous any short-term move, the greater the odds it will soon symmetrically reverse. January 2026’s crazy gold action is a great example. Month-to-date by January’s second-to-last trading day, gold had skyrocketed an astounding 25.1%!
That dangerous near-parabolic surge was popular-speculative-mania-like, stretching gold an unbelievable 43.4% above its baseline 200dma! That proved the most overbought gold had been in a whopping 45.9 years since March 1980! As I warned in an essay that very week, it didn’t end well. Gold crashed 10.3% on January’s final trading day, its third-worst daily loss since 1971! And that reckoning was only getting started.
Over the next 5.5 months into mid-July, gold would suffer a serious 26.3% drawdown. January’s peak climaxed dollar gold’s biggest cyclical bull ever, epic 196.4% gains over 27.8 months without a single 10%+ correction! After gold’s next-ten-largest cyclical bulls, its average drawdowns ran a similar 20.8% over 2.1 months. In early February I warned “a 20%-to-25% total drawdown sure doesn’t sound like a stretch.”
After watching gold skyrocket in August with awe, I’ve wondered if those gains will prove too big too fast to be sustainable. And I’m not the only one judging from feedback from our newsletter subscribers and these weekly web essays. There’s plenty of nervousness out there among hardened gold and gold-stock traders who have experienced gold’s violent cycles, quite a contrast to recent surging general bullishness.
While a symmetrical mean-reversion plunge is certainly possible, I increasingly suspect it isn’t probable for a variety of reasons. Had gold catapulted 15.3% higher at best month-to-date from major highs to super-overbought levels with herd greed running rampant, I’d be as bearish as I was in late January. But the situation birthing gold’s August surge is the polar opposite, with today’s technicals crystal-clear on that.
Heading into January, gold was already trading 19.6% above its 200dma after its already-biggest cyclical bull ever up 148.8% at best over 26.7 months. In contrast entering August, gold languished 9.7% under its 200dma after that serious 26.3% cyclical bear over 5.5 months. Just two weeks earlier, gold had again fallen to its most-oversold close in 9.6 years relative to its 200dma! Gold was due for a major rally out of that.
By late January gold again skyrocketed 25.1% at best month-to-date to a nearly-half-century-high 43.4% above its 200dma! By late August gold did soar 15.3% month-to-date, but had merely regained levels 3.5% above its 200dma. Over the last five calendar years, extreme overboughtness hadn’t even started until gold soared at least 18% above that key baseline. The sentiment backdrops are also radically different.
January was born in universal herd greed that would soon mushroom into wild euphoria, gold was super-popular after its record bull run. Yet August began with gold really out of favor, mired in apathy and bearishness after recent months’ big cyclical bear. While gold’s star has risen dramatically in August thanks to its colossal gains, herd sentiment is still kind of meh. Greed and bullishness haven’t really taken root yet.
The key to understanding gold’s huge August is realizing it is not an anomalous spike in need of a mean reversion, but a mean reversion itself out of an earlier anomaly! Remember in June gold plunged a brutal 11.6% on Fed-rate-hike fears making for one of its worst months ever! For the most part all this huge August accomplished is reversing June’s extreme collapse. That’s evident even on gold’s long-term chart above.
And it is even more so on a gold-summers-indexed chart, updated from my latest summer-doldrums research essay in early June. This indexes all modern gold-bull-year summers from 2001 to 2012 and 2016 to 2026 to 100 as of May’s final closes, rendering all summer price action in perfectly-comparable percentage terms. An indexed level of 95 means gold is down 5% summer-to-date, while 110 is up 10%.
Gold cratered so hard in June that it fell off this chart encompassing fully 22 prior years of data! At worst in mid-July, gold hit 87.4 indexed down 12.6% summer-to-date! As the red line averaging gold’s summer price action shows, its summer-doldrums seasonal low is only down 0.6% in late June. This Tuesday as gold soared 15.3% August-to-date, it was still merely up 2.6% from May’s final close! That’s perfectly average.
Normally at this point in August during all modern gold-bull years, gold is running up 2.4% from the end of May. So for all the sound and fury in gold in these last several months, it’s essentially a wash. All gold soaring in August accomplished is reversing plummeting in June. As that was happening, I explained why gold’s flaring fed fears were highly irrational. June’s carnage centered around two Fed-related events.
In early June gold was consolidating high, gradually working off the technical and sentiment extremes from late January’s epic peak. Then on Jobs Friday June 5th, gold plummeted 3.7% shattering that high consolidation’s well-established multi-month support. That morning’s US May nonfarm-payrolls report printed at a four-standard-deviation beat of 172k jobs added, more than doubling economists’ +80k estimates!
That implied the US economy was strong, so the Fed should hike rates more and sooner to fight war inflation. On June 10th gold suffered another 4.3% plunge, partially on surging bearishness after that Jobs-Friday breakdown and partially on gold’s backward war trade. Gold had already collapsed 10.4% month-to-date then! It started to rebound soaring 3.4% the next day, until mid-June’s FOMC decision crushed it.
That came on the 17th, and was the first under Trump’s new Fed chair. Kevin Warsh came across as hawkish, heavily emphasizing the FOMC’s commitment to “deliver price stability”. That means fighting inflation still running way over the Fed’s 2% target for long years, which traders assumed meant rate hikes. So over the next five trading days starting with that FOMC decision, gold plunged an ugly 7.8% to $3,993!
Gold traders fear Fed rate hikes because they portend higher yields driving the US dollar higher. That in turn can unleash super-leveraged gold-futures selling slamming gold lower. But because trading in that gold-futures realm reacts so fast, that dynamic is usually short-lived. The risks are so extreme in gold futures at 20x to 25x leverage that speculators’ capital firepower is fairly small, so selling soon exhausts itself.
Gold can easily plunge for days to weeks after major economic data surprises or Fed news implying more rate hikes or fewer cuts ahead. But it is highly irrational to fear Fed rate hikes because gold has thrived over entire Fed-rate-hike cycles. I’ve researched gold’s performances during all of them since 1971 when dollar gold was born. In mid-February 2022 I wrote an essay on all that just before the Fed’s last hiking cycle.
Gold anomalously cratered 11.6% in June paving the way for August’s symmetrical reversal mostly due to traders fearing the next Fed-rate-hike cycle. Yet long history argues that’s silly. The Fed has done 13 of those since the dollar’s gold standard was severed in 1971, defined as 3+ consecutive hikes without any intervening cuts. Through the exact spans of all 13, gold has actually averaged big absolute 26.3% gains!
In the majority 8 of those where gold rallied, its average gains soar to a fantastic 48.4%! In the other 5 where gold fell, its average losses ran an asymmetrically-small 9.0%! Generally the more oversold gold was relative to its 200dma leading into rate-hike cycles, and the less violent they were, the better gold performed. And any coming rate-hike cycle will be short and small, with a few 25-basis-point hikes at most.
Gold would laugh at such a puny anemic rate-hike cycle! And Trump’s new Fed chair handpicked to cut rates is unlikely to hike them anytime soon, regardless of what he says about price stability. Actually as I pointed out in a mid-June essay the week of that gold-hammering FOMC meeting, Kevin Warsh’s new Fed regime of less federal-funds-rate forecasting ought to liberate gold from years of Fed-fear-driven tyranny!
Yes gold skyrocketed really far really fast in August which may not be sustainable. Yet that was merely the mean reversion from June’s anomalous plummeting on highly-irrational Fed-rate-hike fears! As a normalization was likely, we aggressively added new smaller-gold-miner trades in our subscription newsletters from mid-June to early August. Midweek their unrealized gains are already running as high as +63.3%!
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The bottom line is gold enjoyed a huge August, soaring in one of its best months ever. A breakout from a major bullish technical pattern was goosed by expanded Treasury bond buying evoking QE. Gold blasted higher so far so fast that traders wondered if such an extreme blistering surge necessitated a symmetrical mean reversion. Yet gold’s August skyrocketing is a mean reversion itself from June’s anomalous plummeting.
Flaring Fed-rate-hike fears then slammed gold into one of its worst months ever. Yet those were highly irrational, as gold has tended to thrive during past Fed-rate-hike cycles and Trump’s new Fed chair is very unlikely to hike anyway. August’s surge merely reversed June’s plunge, leaving gold trading right back at
its average late-summer levels in modern gold-bull years. Neither overbought nor greedy, gold can keep running.
