Bitcoin and gold prices dropped within seconds of the August inflation report on Friday, then recovered most of the loss inside a few minutes. The annual numbers landed exactly on forecast.

What moved markets was the monthly core figure. Prices excluding food and energy rose 0.3% in August, above the 0.2% economists had expected.

Why a 2.4% Print Still Counted as Hot

Annual core inflation held at 2.4%, matching estimates. Headline inflation matched as well, at 3.4%. Neither number handed the Federal Reserve anything new.

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The monthly reading told a different story. Seventeen published forecasts for monthly core inflation circulated before the release. They ranged from 0.16% to 0.24%, and every one of them rounded to 0.2%.

The actual figure came in at 0.29%, or roughly 3.5% at an annual pace. It beat the entire range.

The Consumer Price Index (CPI) measures what urban households pay for a fixed basket of goods and services. Core CPI removes food and energy, which swing on weather and oil markets.

Shelter is the largest single component. It rose 0.3% for the month and 3% over the year, the Bureau of Labor Statistics reported. Shelter had been softening before the release.

Energy drove the headline figure. The energy index climbed 2.1% in August and gasoline rose 3.9%. Over 12 months, gasoline is up 27.4%.

Gold Stopped Acting Like an Inflation Hedge

Gold spot spiked toward $4,353 as the data hit, then collapsed to $4,292 inside the same minute. It settled near $4,358 as of this writing. Bitcoin (BTC) traced the same shape. It slid from roughly $77,100 to $76,050 before recovering.

BeInCrypto flagged this pattern a day earlier, after Thursday’s producer price report pulled gold, Bitcoin, and the S&P 500 down together. That read on gold’s failure as hedge held up within 24 hours.

The mechanism sits in the bond market. Hotter inflation lifts Treasury yields, and higher yields raise the cost of holding assets that pay no income.

Gold and Bitcoin both pay nothing. The 10-year Treasury yield was already near 4.95% before the release.

This was also the second US data release in a week to knock both assets at once. August payrolls tripled forecasts on September 4 and produced the same reaction.

The Fed Decides on Wednesday

The Federal Open Market Committee meets on September 15 and 16. The rate decision lands Wednesday afternoon. Data on the CME FedWatch Tool shows interest bettors now price a near certain rate hike.

Economists have leaned toward a hold. Traders have leaned toward a hike. The monthly core figure strengthens the traders’ case.

Thursday’s producer price data was firm in the categories that feed Personal Consumption Expenditures. That index, not CPI, is the gauge the Fed formally targets. August core PCE could therefore run hotter than these numbers imply.

Rate markets already price tighter policy from three central banks hiking this month. The Bank of Japan and the European Central Bank also decide in the coming days.

The speed of the rebound points to stretched positioning rather than fresh conviction. Wednesday’s decision will show whether one hot month is enough to move the Fed.

Source: BeInCrypto