August 2023 in Precious Metals, by Steven Cochran

Welcome to SurvivalBlog’s Precious Metals Month in Review, where we take a look at “the month that was” in precious metals. Each month, we cover gold’s performance and the factors that affect gold prices.

What Did Gold Do in August?

The triple whammy of higher bond yields, lower oil prices, and a surging dollar worked to depress gold prices in the middle of the month, causing spot gold to close under $1,900 from the 16th to the 22nd. An unexpectedly soft PMI report on the 23rd finally lifted the foot of bond yields off the neck of gold as the dollar also eased. This gave gold a $23 boost that it rode into the end of the month.

COMEX gold futures moved to the December contract on the first of the month, instantly creating a $40 spread versus the spot price. This was good news for gold investors, as it signaled that traders expected gold to be $40 higher by the end of the year.

Factors Affecting Gold This Month


August was the month when the stock market had to pay the piper for this year’s big gains. The stock market is approaching exhaustion as fewer and fewer companies are responsible for maintaining the rally.

Even though the Fed says that its job does not include supporting the stock market, the end of the rally on Wall Street could be taken as a data point that the economy is slowing down.

A slowdown in job growth could be more concrete evidence of a cooling economy. This month’s JOLTS report showed that the number of job openings is falling, while ADP private sector payrolls showed only 177,000 new jobs in August, compared to 324,000 in July.

A hot job market has been a thorn in the Fed’s side since they first began raising interest rates. A slowdown in job growth and moderating economic activity reduces the chance of further rate hikes. The pause in raising interest rates will stop the rally in bond yields and the dollar, which will remove two large headwinds for gold prices.


A plummeting economy has pushed the Chinese economy into deflation. The government’s stimulus measures so far have been too weak and too narrow to have anything but a momentary effect as the threat of a deflationary spiral increases. The central bank has to balance the economic effects of its policy against causing further devaluation of the yuan, which is being forced lower by the faltering economy. The onshore yuan fell to a 16-year low against the dollar in mid-August before currency intervention by Chinese state-owned banks halted the fall.

Banks are facing a liquidity crisis as large corporations and local governments default on their debt. This is prompting analysts to predict a severe real estate crisis on the same level as the 2008 real estate crisis in the US.

Unemployment, already severe, is expected to worsen, leading people to save their money in case they lose their jobs. This has led Chinese consumers to pull back from purchasing jewelry. Some of the slack has been taken up by increased investor demand for gold in order to preserve wealth.

Domestic gold prices in China are rising due to a halt in imports. The government assigns regular quotas to each gold importer. For some reason, new quotas were not issued when the previous ones expired. This might be a quiet way to reduce capital outflows and support a faltering yuan.

Central Banks

The world’s central bankers took advantage of the annual conference in Jackson Hole, Wyoming to push a common theme: rate hikes are not necessarily over. Echoing the “data dependent” mantra set by the Fed’s Jerome Powell, central bankers reiterated that inflation will need to fall further to prevent additional rate hikes.

Stubborn inflation is requiring central banks to push back against market expectations of rate cuts in the near future, adopting a “higher for longer” forecast. Powell told the audience at Jackson Hole that the Fed was prepared to keep hiking rates if needed. The ECB’s Christine Lagarde said that the central bank will keep hiking rates as high as needed to get inflation in Europe under control.
The Bank of England hiked interest rates by 25 bp in a 6-3 split vote. This moved rates to a 15-year high of 5.24%. Two policy committee members wanted a double-sized 50 bp hike, while the third dissenter wanted no hike at all. This was the 14th hike in a row for the BoE.

The UK is facing higher inflation than most of the G-7 nations. The BoE has said that interest rates may have to stay high “for some time yet.”
The big outlier among global central banks is the People’s Bank of China. The Chinese central bank is struggling to pull the country out of deflation without making things worse. It is relying on “baby steps” of stimulus, which has had little to no effect.
The Bank of Japan surprised markets by loosening the trading band on the 10-year bond yield from 0.25% to 0.5%. It says that it will consider moderating its ultra-loose monetary policy if present inflation levels above 2% persist.
The Russian central bank raised rates from 8.5% to 12% in a shocking unannounced move as the ruble hovered around 100 to the dollar. The weakness in the ruble is being caused by external events, not domestic, which means the move will have a limited effect.
The Turkish central bank raised interest rates this month with a huge 7.5% hike to bring rates to 25%. The central bank, finally free of president Erdogan’s bizarre economic “theories,” is rushing to rescue the Turkish economy from a real interest rate of 123%.

Central Bank Gold Purchases

Central bank gold purchases in June saw a net 55.5 tons of inflows. The central banks of China (21.2t), Poland (13.7t), and Turkey (11.4t) were the big buyers, with only two sellers of note: Kazakhstan (-3.2t) and Singapore (-1.0t).

Gold ETFs

July was another bad month for global gold ETFs. North American ETFs saw a net 16.3 tons of outflows. European gold ETFs fared even worse, with a net 18.5 tons withdrawn. Asia was the only region to see net inflows for gold ETFs, at a paltry 1.9 tons. The “Other” region had 1.7 tons of net outflows.

Keeping with recent trends, the nations seeing the largest outflows in July were the US (-16.2 tons) and the UK (-16.6 tons).

(“Other” are Australia, South Africa, Turkey, Saudi Arabia, and UAE.)

On The Retail Front

Preliminary sales figures for US Mint bullion sales in August show that American Silver Eagle sales came close to breaking the 3 million oz mark with sales of 2,942,000. American Gold Eagle sales more than doubled from June, at 85,500 compared to 41,000. Gold Buffalo sales for August were 19,500 compared to 16,500 in June.
The Perth Mint saw a big drop in bullion sales in July. 44,009 ounces of gold bullion products were sold in July, making it the worst month since October 2020. This total was 39.8% lower than the previous month and 44.5% lower than July 2022.

Perth Mint sales of silver bullion bars and coins for July totaled 863,485 ounces. This was the lowest monthly total since February 2020. This was 34.9% lower than in June and a whopping 65% less than last July.
Silver Finally Squeezed
On August 21st, Hecla Mining reported that a fire in the #2 shaft at their Lucky Friday silver mine in Idaho caused a fall of ground that halted production. The Lucky Friday is one of the top seven primary silver mines in the world and was initially projected to produce between 4.4 million and 5 million ounces of silver this year.

The news set off a titanic battle between silver bears and silver bulls, with prices swinging wildly before futures and spot silver ended the day more than 60 cents higher. Silver bulls successfully defended the gains on the 22nd, which set off the long-awaited silver short squeeze on August 23rd.

Short covering saw silver blow past the 20-Day Moving Average (DMA), 50-DMA, 200-DMA levels, forcing traders to cover short positions at ever-higher levels. Prices spiked to more than $25 an ounce before settling back to the mid-$24 area (which is still almost $2 higher than the middle of the month). We may see prices firm up around this level before making another run at the $25 mark.

Market Buzz

Germany, not the US, is the third-largest gold market, behind China and India. That is, until the first half of this year. Gold coin and bar demand in Deutschland plunged 75% compared to the first half of 2022.

German gold demand was only 205 kilograms for the second quarter. That’s only 6,591 troy oz over the three months spanning April to June, compared to US Mint gold bullion sales of 423,000 ozt over the same period.
The World Gold Council reports that global gold sales for the second quarter fell to 921 tons, down 2% compared to last year, thanks to a strong dollar and higher interest rates cooling safe haven demand.
TD Securities sees gold shaking off present headwinds and reaching $2,100 by year-end.
ANZ is also keeping the faith, projecting gold prices to hit $2,100 by the end of the first quarter next year.
UBS is taking a less sanguine view of the gold market, calling for prices to hit $1,950 by the end of the year.
Right before press time, gold hit an all-time high in yen, helped by recent weakness in the Japanese currency.
Jan Nieuwenhuijs has an article at Gainesville Coins: The West Is Losing Control Over The Gold Price.
Two former senior precious metals traders at JP Morgan were sentenced this month for price manipulation that cost investors more than $10 million in losses. Greg Smith was sentenced to two years in federal prison and ordered to pay a $50,000 fine. His partner in crime Michael Nowak was sentenced to one year and one day in prison and fined $35,000.

Looking Ahead To Next Month

Uncertainty over future Fed moves has introduced volatility and uncertainty into gold prices. We probably won’t see a rally until after the September FOMC meeting, all things remaining equal.

Booming bond yields and a strengthening dollar are Public Enemies #1 and #2 when it comes to gold prices. A halt in Fed rate hikes (and even better, any speculation about rate cuts) will weaken both, to the benefit of gold.

Our treasure story this month is about three metal detectorists discovering the first cache of ancient gold coins to be found in Wales. The fifteen 2,000-year-old Celtic gold coins were found on the island of Anglesey off the Welsh coast.

This column is intended for educational purposes only. It is not intended as investment advice. Past performance does not guarantee future results.  – Steven Cochran of Gainesville Coins