August was the month the TSX set eight record closes while oil finished where it started. Gold futures rose 9.1% and the gold miners ETF rose 32.1%, which supplied most of the index gain of 2.7%. Brent crude closed 0.4% higher after trading in a US$15 range, financials fell 3.2%, and the Bank of Canada did nothing while its yields rose. The variable that tied these together was US rate expectations, and it turned against gold in the final week.
Section 01The Month at a Glance
Eight numbers, and two of them do not fit the story told by the rest. Brent barely moved over the month and the TSX rose 2.7%, so oil did not lift the index. Gold rose 9.1% in a month when the US 10-year yield finished at 4.76%, almost exactly where it started at 4.75%, so the metal did not need a falling yield to rally. It needed a weak US labour report, and it lost 4.6% from its August 24 peak when the Federal Reserve chair said on August 28 that underlying inflation had not improved.
Section 02The Arc of the Month
The month opened with a Canadian holiday and a reversal in oil. The TSX closed July at 35,226.14 after TELUS cut its dividend 55% and fell 11.3% on July 31. Canadian markets were closed on August 3 for the Civic Holiday, and over that weekend President Trump cancelled a planned strike on Iran and said a Hormuz deal was close, which Iran denied. WTI fell 10.5% between the July 31 and August 4 closes. The TSX rose 1.63% on August 4 to a record 35,801.59 and added 0.96% on August 5 to 36,146.42 as Shopify rose about 17% on second-quarter revenue growth of 34% and gold rose 3.7%.
The first full week ended with the sharpest labour divergence of the year. On August 7 Statistics Canada reported a gain of 75,100 jobs against a consensus near 15,000, with unemployment at 6.4%, a two-year low. The US lost 23,000 jobs against an expected gain of about 83,000. Gold closed at US$4,399.70, up 7.1% for the week, Brent closed at US$83.55, down 7.3%, and the TSX set a record at 36,381.23.
The second week was a record run that oil tried to interrupt. Iran set new preconditions for reopening the Strait on August 10, naming sanctions relief and war reparations, and WTI rose 5.1% that day. The TSX still set records on August 10, 11, 12 and 13, the last at 36,759.29, for five straight record closes. The International Energy Agency cut its 2026 oil demand forecast to a decline of 1.6 million barrels a day on August 13, US July inflation held at 3.4%, and the TSX slipped 0.08% on August 14 to end the run.
The third week was a bond market week. The interim US and Iran ceasefire memorandum expired on August 17 without extension, and Canadian CPI for July rose to 3.0% from 2.8%, with gasoline up 25.7% from a year earlier. On August 18 the 30-year Treasury yield reached about 5.3%, its highest since June 2007, a vessel was attacked leaving the Strait, and gold fell 1.2% while the TSX fell 0.82%. The US Treasury said on August 19 it would step up buybacks of long-dated debt, the US paused 50% tariffs on Canadian goods for three days, and gold rose 2.8%. The Canadian 10-year yield reached 3.76% on August 21, the highest in more than two years.
The fourth week brought the trade rupture and the record. The pause expired, 50% US tariffs on about US$20 billion of Canadian goods took effect on August 22, and talks collapsed. Canada confirmed on August 25 retaliatory tariffs on C$27.6 billion of US goods, effective September 8. The Canadian 10-year yield fell 14 basis points over two sessions to 3.62%. The TSX still closed at a record 36,957.63 on August 25 as Scotiabank rose 7.0% on a record quarter. A hotter US inflation print on August 26 and the first extended remarks from Federal Reserve Chair Kevin Warsh on August 28 ended the climb: gold fell 2.9% that Friday and the TSX fell 0.76% to 36,553.92, even after second-quarter GDP growth of 3.3% annualized.
The month closed with a military exchange. The US struck Iranian rocket launchers on Larak Island on Sunday, August 30, its first strike on Iranian soil in more than a month, and Iran retaliated against US bases in Jordan and the United Arab Emirates. WTI rose 2.8% on August 31 to US$85.76. Gold fell 1.1% and the TSX fell 1.0%, or 373 points, to 36,180.72, which left the index 2.1% below its record two days before the Bank of Canada decision on September 2.
The TSX closed August 2.7% higher, and the path was a climb through eight record closes, a pause in the bond market of mid-month and a four-session slide after the record of August 25.
The TSX through August. The shaded span marks the five straight record closes of August 7 to 13; the index also closed at a record on August 4, 5 and 25. August 3 was the Civic Holiday and the market was closed, so the month contains twenty sessions.
The remainder of this report isolates the five patterns inside that arc. Each became visible only across the full twenty sessions, and each carries a specific implication for the Bank of Canada decision on September 2, the retaliatory tariffs of September 8 and the Federal Reserve decision on September 16.
Pattern OneGold Miners Built the Record, and the Federal Reserve Set the Price of Gold
Gold futures rose 9.1% in August and the iShares S&P/TSX Global Gold ETF rose 32.1%, about three and a half times the metal. The miners supplied most of the TSX gain. The direction of the metal was set by US rate expectations, not by the war.
The sessions that moved gold are all rate sessions. On August 7 the US lost 23,000 jobs against an expected gain of about 83,000, and gold rose 2.3% on the day and 7.1% for the week. On August 18 the President declared the Strait a new US territory and a vessel was attacked leaving it, and gold fell 1.2% as the 30-year Treasury yield reached its highest since 2007. On August 19 the Treasury announced larger buybacks of long-dated debt and the minutes of the July Fed meeting showed three dissents in favour of a hike, and gold rose 2.8%. On August 28 Chair Warsh said the cooler inflation readings of the summer did not show that underlying trends had improved, and gold fell 2.9% from US$4,664.00 to US$4,529.90.
The war produced one clean test and gold failed it. On August 31, after the US strike on Larak Island and Iranian retaliation, WTI rose 2.8% and gold fell 1.1%. Markets priced roughly a 60% chance of a Fed hike on September 16 by the close, up from about 35% a week earlier. Gold peaked at US$4,697.80 on August 24, 14.4% above its July 31 close, and ended the month 4.6% below that peak. The gold ETF peaked a day later and fell 6.9% from there to August 31.
Single company results showed how crowded the position had become. Barrick Mining rose roughly 30% from mid-July and then fell 6.45% on August 10 after adjusted earnings of 82 cents per share missed consensus by two cents, although gold production beat guidance and revenue rose 44%. On August 5, when gold rose 3.7%, Agnico Eagle gained 9.6%, Kinross 8.6% and Barrick 7.2%.
Why it matters going forward. The TSX record of August 25 depended on a sector that responds to the US dollar and real yields more than to any Canadian variable. A client holding a broad Canadian index owns the miners by weight and by momentum, and the final four sessions showed the cost: the index lost 777 points from its record while gold lost 4.6% from its peak. The test for September is whether gold holds US$4,400 if the Fed raises rates on September 16, and whether a weaker print from the September 4 labour reports restores the bid.
Pattern TwoOil Traded a US$15 Round Trip on Diplomacy Headlines and Finished Where It Started
Brent closed August at US$90.49, 0.4% above its July 31 close of US$90.12. Between those two closes it traded from US$79.36 on August 4 to US$94.39 on August 21. WTI fell 11.2% in three sessions and then rose 16.8% in eleven.
The down leg was a deal headline. Over the weekend of August 1 and 2 the President cancelled a strike on Iran and said a Hormuz agreement was close, and reports followed of a 60-day interim arrangement between Iran, Oman and the US that would route inbound ships through Iranian waters and outbound ships through Omani waters. WTI closed at US$75.22 on August 5. Iran denied that talks were under way, then described a framework in which it controlled security in the Strait, and a US official disputed that account the same week.
The up leg was the failure to close it. A Houthi strike on a Saudi tanker followed on August 5. Iran set new preconditions on August 10 and WTI rose 5.1% that day. The ceasefire memorandum expired on August 17 without extension, and on August 18 the President posted a map declaring the Strait a new US territory. WTI peaked at US$87.83 on August 20 and Brent at US$94.39 on August 21. The Treasury then announced the broadest Iran sanctions campaign of the war, naming nearly 60 entities and vessels, and WTI fell 2.4% on August 24 and 3.1% on August 25 as the market read financial pressure, not lost supply. Talks between Iran and Oman on a shared shipping corridor continued, and WTI closed at US$82.23 on August 26.
Demand data pulled the price down each time supply headlines faded. On August 13 the International Energy Agency forecast an annual decline in 2026 oil demand of 1.6 million barrels a day, its first full-year contraction call since the pandemic, and OPEC trimmed its growth forecast to 580,000 barrels a day, its fourth consecutive cut. US crude inventories rose 17.4 million barrels in the week ended August 7, the largest weekly build since early 2023. The supply picture stayed severe: the Agency still projected global supply falling 4.3 million barrels a day, and Hormuz transits remained a fraction of the pre-war level. The iShares S&P/TSX Capped Energy ETF rose only 2.4% in the month.
Gold ended August 9.1% above its July 31 close, the TSX 2.7% above it and Brent 0.4% above it, with the widest gap between gold and oil on August 24 and a narrowing gap in the last four sessions.
Each series is rebased to 100 at the July 31 close. Brent and gold are front-month futures closes; the TSX is the official index close. August 31 values: gold 4,481.50, TSX 36,180.72, Brent 90.49.
Why it matters going forward. A client who bought Canadian energy as a Hormuz hedge received almost nothing over the month, because the price paid for every escalation was returned within days by a deal headline or a demand forecast. Energy equities responded the same way and rose only 2.4%. Oil at the end of August sat 4.1% below its monthly high with a new strike exchange on the tape, so the range of the next month is likely to be set by whether the Oman corridor talks produce an arrangement or the military exchange widens.
Pattern ThreeCanadian Yields Rose Without the Bank of Canada and Fell on the Trade War
The Bank of Canada policy rate did not change in August. The Government of Canada 2-year yield rose from 2.91% to 3.01%, the 5-year from 3.27% to 3.33% and the 10-year from 3.65% to 3.73%. The 10-year reached 3.76% on August 21, the highest in more than two years, and then fell 14 basis points in the two sessions after the trade talks collapsed.
The first leg was a fall and a climb. The 10-year yield fell 10 basis points to 3.55% on August 4 as oil dropped on the deal reports, then rose to 3.72% on August 10, when Iran set new preconditions and oil jumped, and fell 7 basis points on August 13 after US inflation held at 3.4% in July. The 5-year yield, which prices a fixed mortgage, rose 19 basis points from 3.17% on August 4 to 3.36% on August 21, while the 30-year Treasury yield reached about 5.3% on August 18, its highest since June 2007.
The second leg was a trade shock. On August 24 the 10-year yield fell 8 basis points to 3.68% and on August 25 another 6 to 3.62%, after the 50% US tariffs took effect over the weekend and Ottawa confirmed retaliation on C$27.6 billion of US goods. The bond market read the tariffs as a growth risk that outweighed 3.3% GDP growth. The relief lasted two sessions. A US core PCE inflation print of 3.3% on August 26 and Chair Warsh on August 28 sent the 10-year back to 3.73%, and the US 10-year yield ended the month at 4.76%, slightly above its July 31 level of 4.75%.
The three yields rose together through August 21 and fell together on August 24 and 25, with the largest single-day steps on August 4, August 10, August 13 and August 24, and a recovery of 11 basis points in the 10-year by the last session.
Government of Canada 10-year, 5-year and 2-year benchmark yields. The shaded span marks the August 21 to 24 peak and reversal of the 10-year yield.
Why it matters going forward. A fixed mortgage prices off the 5-year yield, and five-year fixed rates were already 4.0% to 4.6% in early August with bank forecasts of 4.5% to 4.9% by year end. A client renewing in the next 12 to 18 months faces a rate set by the Treasury market and the trade war together, and neither depends on what the Bank of Canada does on September 2. Utilities, the most rate-sensitive sector on the index, fell 5.9% in the month.
Pattern FourCanadian Data Argued for a Hike, Washington Argued for a Cut, and Markets Priced a Hold
Second-quarter GDP grew at a 3.3% annualized pace against a Bank of Canada forecast of 2.5%. Unemployment fell to a two-year low of 6.4%, and headline CPI rose to 3.0%. Against that, 50% US tariffs on about US$20 billion of Canadian goods took effect on August 22, and Canada retaliates on September 8. Money markets priced a Bank of Canada hold on September 2 at roughly 94%.
The case for a hike was the strongest Canadian growth data in three years. GDP rose 0.8% in the second quarter, the fastest pace since early 2023, with exports up 3.6% and household spending up 0.8%, and the first quarter was revised from a contraction to slight growth. July employment rose 75,100 against a consensus near 15,000. Headline CPI of 3.0% was driven by a 25.7% rise in gasoline prices, but excluding gasoline CPI held at 2.2% for a third month and core measures stayed near the 2% target.
The case against was the trade shock. The US invoked Section 338 of the Tariff Act of 1930 in three proclamations of July 20 covering vehicles, alcohol and dairy, paused the 50% tariffs on August 19 and let the pause expire. Retaliation by Canada covers more than 700 products at rates of 15%, 25% and 50%, and Ottawa announced a C$7.5 billion support package on August 25. Washington has also confirmed that duties on Canadian autos, trucks, parts and steel rise to 50% on January 1, 2027.
Markets split the difference. Pricing for the September 2 decision was about 94% for a hold on August 31, and the live question moved to December, where swap pricing implied about a 46% chance of a hike on August 28. TD Securities forecast two hikes of 25 basis points in early 2027, while Rosenberg Research argued the Bank would look through tariff inflation to support growth. The Canadian dollar rose 1.2% to 72.12 US cents, reached a monthly best of 72.67 cents on August 21, and gave back 0.6% on August 24 when the talks collapsed. The policy gap to the Fed, 150 basis points at the upper bound, stayed wide.
Why it matters going forward. The September 2 decision is close to a formality, so the information will be in the language. A Bank that says it may look through tariff effects points to a hold into October, and a Bank that stresses 3.0% inflation and 3.3% growth keeps the December hike priced. Employment reports for August, due September 4 in both countries, are the next test of whether the labour divergence of August 7 persists. The October 28 decision, with a full Monetary Policy Report, is the one that matters more.
Pattern FiveBanks Reported Record Profits and the Financials Sector Still Fell
The Big Six banks reported on August 25 to 27 with record quarters at Scotiabank and RBC, 38% profit growth at TD and 22% at BMO. The iShares S&P/TSX Capped Financials ETF still fell 3.2% in August, and a client who read the earnings headlines alone would have assumed the opposite.
The earnings were strong. Scotiabank reported an adjusted return on equity of 14.2%, above its own 14% target, and rose 7.0% on August 25 to an all-time high of C$128.73. BMO reported earnings growth of 22%, announced a buyback of up to 25 million shares and raised its dividend 5%. RBC reported record net income of C$6.0 billion, up 11%. TD reported profit growth of 38%, and CIBC reported adjusted net income of C$2.65 billion, up 26%.
The reactions were uneven and the sector had already fallen. The financials ETF peaked at 97.45 on August 14 and fell 5.8% to 91.79 by August 20, before earnings, as the 10-year yield rose and all five major banks closed lower on August 18, down 1.1% to 1.7%. CIBC fell 3.8% on its report despite a beat, and National Bank fell 5.1% despite beating estimates. The ETF recovered 2.3% into August 25 and finished the month at 92.68, 3.2% below July 31.
The rest of the index showed the same split. Over the month the gold ETF rose 32.1%, the materials ETF 25.7%, technology 5.3% and energy 2.4%. Financials fell 3.2% and utilities 5.9%. The S&P 500 rose 2.6%, so the Canadian result of 2.7% sat on a base that was narrower than the headline.
Why it matters going forward. Financials are the largest sector on the TSX, so an index that rose 2.7% in a month when they fell 3.2% depended on the miners. When gold turned in the final sessions, financials offered no cover: the ETF lost another 1.3% from August 25 while the index lost 2.1%. Advisors should expect banks to trade on the Canadian 5-year yield and the September 8 tariffs more than on the quality of the quarter.
Section 03What the Patterns Imply
Five patterns, one structure. August was the month the TSX rose on a single trade. Gold miners returned 32.1% on a metal that returned 9.1%, and the metal moved on US rate expectations. Oil moved on diplomacy and ended flat. Canadian yields rose with no Bank of Canada move and fell on the trade war. Strong domestic data met a trade shock, and record bank profits met a falling sector. In each case the stated story and the price disagreed, and the price followed rates and trade.
The risk running into September is that the index is priced for gold to hold its gains while the Fed turns hawkish. Five events test it. The Bank of Canada decides on September 2, both countries report employment on September 4, Canadian retaliatory tariffs begin on September 8, the Federal Reserve decides on September 16, and the Bank of Canada decides again on October 28.
The Bank of Canada holds at 2.25% on September 2 with cautious language. Gold trades between US$4,300 and US$4,700 on alternating labour data and Fed signals, and Brent stays between US$85 and US$95 on Hormuz headlines.
The Canadian 5-year yield holds between 3.20% and 3.45%, and the TSX trades between 35,800 and 37,000.
- Gold holds US$4,300-4,700
- Brent holds US$85-95
- GoC 5Y stays in 3.20-3.45%
Soft US labour data cuts the priced probability of a Fed hike on September 16 and gold resumes its climb past the US$4,698 peak of August 24. The Oman corridor talks produce an arrangement and Brent trades toward US$85.
The TSX returns above its record of 36,958, led again by the miners, with financials joining.
- Fed hike odds below 40%
- Gold above US$4,700
- TSX closes above 36,958
The Fed raises on September 16 and signals more, gold falls below US$4,300 and the miners give back a large share of a 32.1% month. The military exchange widens and Brent moves above US$95 as retaliation begins on September 8.
The Canadian 5-year yield rises through 3.45% and the TSX closes below 35,800, the level of August 4.
- Fed hikes on Sep 16
- Gold below US$4,300
- TSX closes below 35,800
The asymmetry going into September is that the index gained 2.7% in a month in which neither central bank moved. The Federal Reserve held on July 29 and the Bank of Canada held on July 15, yet gold rose 9.1%, the 10-year Canadian yield rose 8 basis points and the Canadian dollar rose 1.2%. The decisions that matter most to a Canadian portfolio before October 28 are being made in the US labour data, the Treasury market and the tariff schedule.
Section 04Data Appendix
The daily closing series underlying every chart and figure in this report. August 3 was the Civic Holiday and the TSX was closed, so the month contains twenty sessions. Brent and WTI are front-month futures closes, gold is the front-month COMEX futures close, the yield column is the Bank of Canada Valet 5-year benchmark, and CAD/USD is the inverse of the Bank daily average USD/CAD rate. The Jul 31 row is the base for every percentage change in this report.
| Session | TSX | WTI US$ | Brent US$ | Gold US$ | GoC 5Y % | CAD/USD |
|---|---|---|---|---|---|---|
| Jul 31 (base) | 35,226.14 | 84.67 | 90.12 | 4,107.00 | 3.27 | 0.7128 |
| Aug 4 | 35,801.59 | 75.77 | 79.36 | 4,152.60 | 3.17 | 0.7108 |
| Aug 5 | 36,146.42 | 75.22 | 79.45 | 4,305.20 | 3.17 | 0.7130 |
| Aug 6 | 36,136.31 | 77.29 | 82.49 | 4,299.60 | 3.22 | 0.7134 |
| Aug 7 | 36,381.23 | 78.18 | 83.55 | 4,399.70 | 3.26 | 0.7172 |
| Aug 10 | 36,458.30 | 82.13 | 87.72 | 4,419.70 | 3.34 | 0.7173 |
| Aug 11 | 36,475.92 | 83.20 | 88.91 | 4,441.10 | 3.32 | 0.7180 |
| Aug 12 | 36,662.10 | 83.27 | 88.98 | 4,467.50 | 3.30 | 0.7179 |
| Aug 13 | 36,759.29 | 81.25 | 87.07 | 4,420.40 | 3.23 | 0.7175 |
| Aug 14 | 36,730.27 | 82.40 | 88.52 | 4,437.30 | 3.28 | 0.7207 |
| Aug 17 | 36,667.92 | 84.50 | 90.87 | 4,473.70 | 3.31 | 0.7212 |
| Aug 18 | 36,367.93 | 84.94 | 91.02 | 4,420.60 | 3.29 | 0.7200 |
| Aug 19 | 36,401.79 | 85.83 | 91.62 | 4,545.30 | 3.30 | 0.7234 |
| Aug 20 | 36,365.42 | 87.83 | 93.78 | 4,571.40 | 3.35 | 0.7254 |
| Aug 21 | 36,620.23 | 87.06 | 94.39 | 4,680.60 | 3.36 | 0.7267 |
| Aug 24 | 36,714.10 | 85.01 | 92.17 | 4,697.80 | 3.28 | 0.7224 |
| Aug 25* | 36,957.63 | 82.36 | 88.58 | 4,694.50 | 3.22 | 0.7226 |
| Aug 26 | 36,813.70 | 82.23 | 87.84 | 4,653.30 | 3.26 | 0.7207 |
| Aug 27 | 36,834.25 | 83.53 | 89.70 | 4,664.00 | 3.30 | 0.7214 |
| Aug 28 | 36,553.92 | 83.40 | 89.31 | 4,529.90 | 3.34 | 0.7200 |
| Aug 31 | 36,180.72 | 85.76 | 90.49 | 4,481.50 | 3.33 | 0.7212 |
*August 25 TSX close of 36,957.63 was the record of the month, 2.1% above the August 31 close. TSX levels follow the exchange closing figures published at the time. Sources differ slightly on some settlement prices; this table follows the series named above.