Gold and Bitcoin fell Thursday after hotter U.S. inflation pushed Treasury yields and Federal Reserve rate-hike expectations higher, creating a sharp contrast with record institutional demand for bullion.
Spot gold dropped more than 1% toward $4,358 an ounce, while Bitcoin also weakened as investors moved away from non-yielding assets. August producer prices rose 0.4% month over month and 5.4% year over year, slightly above the 5.3% annual consensus.
The reaction was driven largely by rates. The 10-year Treasury yield moved around 4.9%, while markets raised the probability of a September Fed hike to roughly 70%, up from around 62% before the PPI release.
Record ETF Demand Meets a Rate Shock
Gold’s decline is notable because institutional demand had just delivered one of its strongest months on record.
The World Gold Council’s August data showed global gold ETFs attracted $18 billion, the second-largest monthly inflow ever. Holdings increased by 121 tonnes to a record 4,189 tonnes, while assets under management jumped 16% to $615 billion.
Europe led with $7.9 billion of inflows, while North American funds added $7.7 billion.
That strengthens the longer-term institutional gold story, but Thursday showed that even strong ETF buying cannot completely offset a sudden jump in real yields and rate expectations.
Investors seeking bullion exposure have increasingly used gold ETFs as a liquid alternative to physical metal, making ETF flows an important gauge of institutional positioning.
Bitcoin and Gold Face the Same Yield Problem
Bitcoin’s decline reinforces a growing short-term relationship between the two assets.
Neither Bitcoin nor gold produces yield. When Treasury rates climb toward 5%, government bonds become more attractive relative to both assets.
The move comes just days after the Bitcoin-gold ratio reached around 18, with Bitcoin having significantly outperformed gold over the previous month.
Oil is adding another complication. Brent has pushed above $100 as Middle East supply risks intensify, feeding directly into inflation concerns. Coinpaper’s recent look at the $100 oil breakout showed how quickly crude recovered from July lows near $72.
The next major test comes with Friday’s U.S. CPI report.
For gold, the key question is whether record ETF demand can reassert itself once the rate shock fades. For Bitcoin, another hot inflation print could keep pressure on risk assets and strengthen the competition from near-5% Treasury yields.
