Stock exchange traded funds dropped sharply in August before recovering somewhat as Europe’s debt crisis and Standard & Poor’s downgrading its U.S. credit rating sapped investor sentiment.

Meanwhile, ETFs that track market volatility spiked at the expense of equities, while safe-haven traders flocked to gold, which helped push the precious metal to all-time record highs.

The broader equities markets saw a mass exodus of investors during the risk-off environment. The Dow Jones Industrial Average ended August down 3.96%, the S&P 500 lost 5.43% and the Nasdaq fell 6.42%.

VIX-related funds were among the top performing unleveraged exchange traded products for the month. The VelocityShares Daily Long VIX Short-Term ETN (NYSEArca: VIIX) and iPath S&P 500 VIX Short-Term Futures ETN (NYSEArca: VXX) surged a little more than 65% while the ProShares VIX Short-Term ETF (NYSEArca: VIXY) vaulted 73%.

Additionally, the other top performers in August included gold funds. The iShares Gold Trust (NYSEArca: IAU) and the SPDR Gold Shares (NYSEArca: GLD) both gained 12.7% while the ETFS Physical Swiss Gold Shares (NYSEArca: SGOL) and Powershares DB Gold Fund (NYSEArca: DGL) increased by 12.6%.

Click here for the full August ETF Performance Report (PDF file). Or visit our ETF Analyzer for current ETF performance.