Gold and precious metal funds topped the chart in August, as geopolitical conflict, sticky inflation and rising bond yields characterised a supposedly quiet month, according to Ben Yearsley, director at Fairview Investing.
Nine of the top 10 best-performing funds last month were commodity funds, and mainly precious metals ones, he noted.
At the top of the chart was Baker Steel Gold & Precious Metals, which rose 36% last month, according to FE fundinfo data, followed by Ninety One Global Gold at 34%.
This continued in the investment trust space, with the Golden Prospect Precious Metals trust rising by 33.9%.
“With gold equities chucking off cash after gold’s historic rise in price over the last few years, any further uplift just goes straight to the bottom line,” Yearsley said. “Between Iran, government debt, rising bond yields and questions over the dollar, gold bugs have rarely had so much material to work with.”
Perhaps unsurprisingly then, the IA Commodity and Natural Resources and the IT Commodity and Natural Resources sectors topped the charts in the open- and closed-ended universe.
The only fund in the top 10 that was not a commodity or precious metal fund was the Ark Disruptive Innovation fund, which rose 18.9%.
Elsewhere, Yearsley noted investors have remained remarkably sanguine, despite the usually “toxic cocktail” of conflict, inflation and uncertain yields.
“Investors seem determined to keep climbing the wall of worry – although with rate cuts disappearing into the distance, September could provide a few loose bricks.”
In the UK, the FTSE 100 gained 0.22%, benefitting from the areas that made it look “deeply unfashionable” during the tech boom: banks, energy companies, miners and low exposure to AI stocks, keeping it close to July’s record high.
Meanwhile in the US, despite concerns about inflation and the amount of money going into AI companies, the S&P 500 still rose 3.1% in sterling terms. This was bolstered by Nvidia, which saw quarterly revenue rise to $96.2bn, up 106% year-on-year.
“The numbers were spectacular; the market reaction was rather more restrained, which probably tells you something about how spectacular expectations have become,” Yearsley said. That said, the Nasdaq was still up 3.99%, making it one of the leading global markets.
Finally, Yearsley described Asia as something of a “Wild West”, with Japanese technology shares experiencing large swings, while South Korea bounced sharply.
See also: Japan grapples with yen strength following US intervention
However, while equity markets remained mostly risk-on, fixed income land was a bit more nuanced.
Following Federal Reserve chair Kevin Warsh’s speech at Jackson Hole, markets have priced in more than a 60% probability of a September rate rise. However, the US jobs market slid in July, leaving the US central bank stuck between a weakening labour market and sticky inflation.
Ten-year Treasury yields inched up to 4.75% as yields jumped following the Jackson Hole speech, US public debt hit $40trn, and the Treasury intervened to announce a double purchase of long-dated treasuries.
It was a similar story in other fixed income markets. UK gilts rose to 5.14%, up from 5.05% a month prior, while Germany and Japan’s borrowing costs hit record highs. The German bund finished the month yielding 3.32%, and the Japanese 10-year finished the month at 2.95%.
See also: US Treasury’s bond market move leaves investors expecting more
