Hot US Inflation Sends Gold and Bitcoin Lower as Fed Rate Hike Bets Surge

Gold, Bitcoin, and U.S. stocks came under pressure on Thursday, September 10, after another strong inflation report pushed Treasury yields higher and increased expectations for a Federal Reserve rate hike.

U.S. producer prices rose 0.4% in August, matching forecasts, while annual PPI inflation accelerated to 5.4%, slightly above the expected 5.3%. The hotter reading triggered selling across financial markets, with even traditional inflation hedges struggling.

Spot gold fell more than 1% toward $4,350 after previously trading above $4,400. Bitcoin also declined, while the S&P 500 weakened as investors reassessed the outlook for interest rates.

The biggest pressure came from the bond market. The 10-year U.S. Treasury yield climbed above 4.9%, reaching its highest level since October 2023, while the 30-year yield rose to around 5.35%. Rising yields can reduce demand for non-yielding assets such as gold and Bitcoin because government bonds and cash become relatively more attractive.

Rate expectations shifted quickly following the inflation data. CME FedWatch pricing showed the probability of a September Fed rate hike rising to about 70%, compared with roughly 62% previously. A stronger U.S. dollar also weighed on dollar-denominated gold prices.

However, the details of the PPI report suggested much of the inflation pressure came from energy rather than a broad surge in prices. The Bureau of Labor Statistics reported that final demand goods prices jumped 1.1%, while final demand services increased only 0.1%. More than three-quarters of the rise in goods prices was attributed to energy.

The market reaction highlights a challenge for both Bitcoin and gold as inflation hedges. While persistent inflation can undermine the purchasing power of cash, it can also drive interest rates and bond yields higher, creating competition for investor capital.

Attention now turns to Friday's U.S. Consumer Price Index report. Another hotter-than-expected CPI reading could strengthen expectations for a September Fed rate hike and add further pressure on Bitcoin, gold, and equities.