August saw a global asset reshuffle: gold surged 9.7%, leading the pack, agricultural products soared, and long-term bonds emerged as the biggest losers.

August saw a global asset reshuffle: gold surged 9.7%, leading the pack, agricultural products soared, and long-term bonds emerged as the biggest losers.

Gold and agricultural products dominated the August gainers list, while long-term bonds came under pressure and hit multi-year highs, and the US dollar weakened for the second consecutive month.

Global asset performance diverged significantly in August. According to Deutsche Bank's latest monthly review, precious metals and agricultural products led the gains, with gold surging 9.7% and silver soaring 15.6%. Meanwhile, the continued closure of the Strait of Hormuz and El Niño weather patterns combined to push wheat, corn, and sugar futures to their largest monthly gains in years. Stock markets steadily rose, supported by strong economic data and a favorable earnings season, with the S&P 500 index gaining 2.7% for the month.

However, the market was not entirely bullish. Yields on long-term bonds in several major global economies rose to multi-year highs, with the yield on the 30-year US Treasury note briefly touching its highest level since 2007. German and Japanese long-term bonds also weakened under pressure. The US Treasury's unexpected announcement of a significant expansion of its long-term bond repurchase program, while briefly lowering long-term yields, also triggered market concerns about "financial repression," further driving up gold prices and weakening the dollar.

Long-term yields hit multi-year highs, making the bond market the biggest loser.

The most closely watched market developments in August focused on the sharp rise in global long-term bond yields. According to Deutsche Bank data, the yield on the 30-year US Treasury bond reached 5.31% on August 17, the highest since 2007; the yield on the 30-year German government bond rose to 3.81% on August 31, the highest since 2011; and the yield on the 30-year Japanese government bond reached 4.14% on August 18, a record high since the first issuance of bonds of that maturity in 1999.

The factors driving up long-term interest rates are multifaceted. Firstly, optimistic global growth expectations – the Eurozone's preliminary composite PMI rose to 52.1 in August, a nine-month high; the US figure rose to 56.0 during the same period, a four-year high, reflecting strong resilience in economic activity. Secondly, renewed inflationary pressures, with the continued blockade of the Strait of Hormuz leading to a significant rise in commodity prices, especially food. Thirdly, fiscal concerns have resurfaced.

At the end of the month, long-term yields saw a temporary decline. On August 19, the U.S. Treasury unexpectedly announced that it would "at least double" the size of its long-term bond repurchase operations, raising the maximum amount for a single operation from $2 billion to at least $4 billion. This move caught the market off guard, as just two weeks earlier, the Treasury had announced its provisional repurchase plan for the quarter in its regular refinancing announcement.

Looking at the performance of various markets, the European bond market as a whole underperformed. Yields on 10-year French, Italian, and German government bonds rose by 18, 13, and 12 basis points respectively, significantly exceeding the increases in the US (+2 basis points) and the UK (+1 basis point). In Japan, as market expectations for further interest rate hikes intensified, yields on 10-year and 2-year government bonds rose by 15 and 23 basis points respectively.

The U.S. Treasury yield curve has flattened overall. The 2-year yield rose 5 basis points this month (jumping as much as 11 basis points after the Jackson Hole speech last Friday), but the 30-year yield eventually fell slightly by 3 basis points, and the curve flattened.

Gold and silver prices surged as concerns about financial repression ignited safe-haven buying.

Precious metals were the best-performing asset class in August. Gold prices rose 9.7% in the month, closing at $4,437 per ounce; silver saw an even more significant increase, surging 15.6% to close at $66.58 per ounce.

There are two core drivers behind the surge in precious metals prices: rising inflation expectations and heightened market concerns about financial repression. The U.S. Treasury's decision to significantly expand its long-term bond repurchase program was interpreted by some market participants as a signal of policy intervention to lower long-term interest rates, raising concerns about the erosion of currency purchasing power. Meanwhile, the U.S. dollar index weakened by 0.5% in August, marking its second consecutive monthly decline, which also provided additional support for dollar-denominated precious metals.

Agricultural products saw a broad-based surge, with many sectors experiencing their largest price increases in several years.

Food prices were another major focus in August. The continued closure of the Strait of Hormuz, coupled with the impact of this year's El Niño weather pattern, led to a sharp rise in agricultural futures prices.

Specifically, corn futures rose 16.8% this month, the largest monthly gain in five years; wheat rose 18.3%, the strongest monthly performance in four years; and sugar prices surged 21.5%, the largest monthly gain since 2018. This concentrated surge in agricultural products reflects both real disruptions on the supply side and the market's advance pricing of uncertainty regarding future food supplies.

The stock market is steadily rising, while the semiconductor sector is calming down.

Despite pressure on the bond market, the stock market performed steadily overall in August. The S&P 500 index returned 2.7% for the month, hitting a new record high on August 13; the European STOXX 600 index rose 0.5%, also reaching a record high on August 11; and the MSCI Emerging Markets Index rose 3.4% for the month, showing relatively strong performance.

At the sector level, technology stocks continued to lead the rally. The S&P 500 Information Technology sector rose 6.2% this month, while the "Magnificent 7" technology giants portfolio as a whole gained 4.4%.

It is worth noting that the Philadelphia Semiconductor Index rose by only 2.0% in August, a significant improvement compared to the previous four months of double-digit swings, indicating a clear stabilization in market sentiment.

Oil prices rose slightly, with geopolitical games remaining the main theme.

The crude oil market remained relatively stable in August. Brent crude rose 0.4% to settle at $90.49 a barrel, the smallest monthly fluctuation since 2024; WTI crude rose 1.3% to settle at $85.76 a barrel.

However, oil prices did not have a smooth ride throughout the month. At the beginning of the month, Trump posted on social media that he had agreed to cancel the planned attack on Iran, leaving room for the resumption of negotiations between the two sides, and Brent crude oil briefly fell below $80 per barrel. But the negotiations ultimately failed to materialize, and Trump subsequently stated that "no negotiations or dialogues are taking place or have been arranged." At the end of the month, military clashes broke out again between the US and Iran, and oil prices rebounded accordingly.

Meanwhile, European natural gas futures prices surged 18.2% to settle at €69.81 per megawatt-hour; U.S. natural gas futures also rose 6.8%.

The Federal Reserve's hawkish stance has led the market to bet on a September rate hike.

Federal Reserve Chairman Warsh's speech at the Jackson Hole symposium further influenced market expectations. His wording was more hawkish than anticipated, emphasizing that the Fed's 2% inflation target is "a firm, fixed target," and stating that while summer inflation data was better than expected, "that doesn't tell me there's been a substantial improvement in the underlying trend." Following the speech, the 2-year U.S. Treasury yield jumped 11 basis points in a single day, and the yield curve flattened further. As of the end of the month, futures market pricing indicated a 65% probability of a September rate hike, with the market tending to bet that the Fed will continue to tighten policy.

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