US Inflation Report Sinks Gold and Bitcoin Amid Rate Hike Fears

The US inflation report for August delivered another hot reading, causing markets to take a hit. Gold and Bitcoin both fell in response to the news, as did the S&P 500. The producer price index (PPI) rose 0.4% in August, matching forecasts, with an annual rate of 5.4%, slightly above expectations.

The report showed that US producer prices rose 5.4% year-over-year and 0.4% month-over-month. Core PPI, which excludes food and energy prices, also increased by 4.6% year-over-year and 0.2% month-over-month.

Gold's spot price fell more than 1%, dropping to around $4,350 after trading above $4,400. This move hurt forex traders who hold long positions in gold, as a standard gold lot represents 100 ounces and a $100 drop means roughly $10,000 in losses.

The real damage came from bonds, with the 10-year Treasury yield pushing above 4.9%, its highest since October 2023. The 30-year reached around 5.35%. Higher yields make cash and government debt more attractive, as they pay interest, unlike gold and Bitcoin.

Bitcoin's price also fell in response to the news, with CME FedWatch pricing moving towards a 70% chance of a September rate hike after the data, up from around 62%. The dollar strengthened as rate-hike bets rose, adding another headwind for dollar-priced gold.