Bitcoin and Gold Prices Crash on Higher Core Inflation

The August inflation report in the US caused a sudden drop in Bitcoin and gold prices on Friday. The annual Consumer Price Index (CPI) numbers matched forecasts at 3.4%, while core CPI, excluding food and energy, rose 2.4% year-over-year.

However, it was the monthly reading that caught markets off guard. Core CPI increased 0.3% in August, beating estimates of 0.2%. This higher-than-expected figure sent shockwaves through financial markets.

The bond market is a key factor in this reaction. When inflation rises, Treasury yields increase, making it more expensive to hold assets that don't pay income, such as gold and Bitcoin. The 10-year Treasury yield was already near 4.95% before the release.