Hot Inflation Report Sends Gold and Bitcoin Plummeting
The recent US inflation report on September 10 had far-reaching effects across various financial markets. The Producer Price Index (PPI) rose 0.4% in August, matching forecasts, and its annual rate reached 5.4%, slightly above the 5.3% expected. This news sent shockwaves through gold, Bitcoin, and the S&P 500.
Gold, traditionally considered a safe-haven asset, failed to act as an inflation hedge. Its price fell more than 1%, dropping toward $4,350 after trading above $4,400. For forex traders, this move was detrimental, with a standard gold lot representing 100 ounces and a $100 drop resulting in roughly $10,000 in losses on a one-lot long position.
The real damage came from the bond market, where the 10-year Treasury yield pushed above 4.9%, its highest since October 2023. The 30-year reached roughly 5.35%. Higher yields make cash and government debt more attractive, as they pay interest. Gold pays no yield, nor does Bitcoin.
The CME FedWatch pricing moved toward a 70% chance of a September rate hike after the data, up from roughly 62%. The Bureau of Labor Statistics reported that prices for final demand goods advanced 1.1 percent, and the index for final demand services increased 0.1 percent. More than three-quarters of the goods increase came from energy, making the report look more like an energy shock than a broad inflationary surge.