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.

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

Why Hot Inflation Hurt Gold

The detail inside the report mattered. The Bureau of Labor Statistics said: “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. That made the report look more like an energy shock than a broad inflationary surge.

The dollar also strengthened as rate-hike bets rose, adding another headwind for dollar-priced gold.

BeInCrypto had warned earlier this week that Treasury yields near 5% could start competing directly with Bitcoin and gold for institutional capital.

The next test comes Friday with US CPI (Consumer Price Index). Another hot reading would put more pressure on the Fed to hike — and test how far “inflation hedges” can fall when inflation itself becomes the problem.

Source: BeInCrypto