Gold and Crypto Fall as Hot US Inflation Rattles Markets

Another hot US inflation report arrived on Thursday, September 10, and all financial markets took a hit, including Gold, Bitcoin, and the S&P 500.

It seems like even traditional safe-haven assets like gold are not acting as an inflation hedge. The bond market recently delivered a reminder that inflation hedges can struggle when rising prices also mean higher interest rates.

Gold’s Inflation Trade Breaks

US producer prices rose 0.4% in August, matching forecasts. The annual rate reached 5.4%, slightly above the 5.3% expected.

Gold is supposed to benefit when inflation erodes the value of cash. Instead, spot XAU/USD fell more than 1%, dropping toward $4,350 after trading above $4,400.

For forex traders, that move hurts. A standard gold lot represents 100 ounces. A $100 drop means roughly $10,000 in losses on a one-lot long position, excluding trading costs.

The real damage came from bonds. 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. Gold pays no yield. Bitcoin pays no yield either.

Bitcoin and Gold (XAU/USD) Price Performance. Source: TradingView

CME FedWatch pricing moved toward a 70% chance of a September rate hike after the data, up from roughly 62%.