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BTC Gold and Bitcoin both fell on Thursday: high inflation pushed up U.S. bond yields, and institutional demand was strong but difficult to withstand interest rate shocks.
Affected by higher-than-expected U.S. inflation data, both gold and Bitcoin prices fell on Thursday. This trend has pushed up U.S. Treasury yields and the Federal Reserve's interest rate hike expectations, in sharp contrast to previous record institutional investors 'demand for gold.
Spot gold fell more than 1%, moving closer to around US$4,358 an ounce; Bitcoin also weakened, and investors withdrew from non-interest-bearing assets. The producer price index (PPI) rose 0.4% month-on-month and 5.4% year-on-year in August, slightly higher than the market's consensus expectation of a 5.3% annual growth rate.
Market response is mainly driven by interest rate factors. Yields on 10-year U.S. bonds fluctuated around 4.9%, while market expectations for the probability of a Fed rate hike in September were raised to about 70% from about 62% before the PPI release.
Record ETF demand hits interest rate shock
The decline in gold is remarkable because it comes after institutional investor demand had just recorded one of the strongest monthly performances in history.
World Gold Council data showed that global gold ETFs attracted US$18 billion in capital inflows, setting the second-largest monthly net inflow record in history. Positions increased by 121 tons to a record 4,189 tons, and the size of assets under management (AUM) jumped sharply 16% to US$615 billion. Among them, capital inflows from Europe increased by US$7.9 billion, while North American funds increased by US$7.7 billion.
This further consolidates the long-standing institutional gold investment logic, but Thursday's market performance showed that even strong ETF buying efforts cannot fully offset the negative impact of sudden surges in real yields and interest rate expectations. Investors seeking gold exposure are increasingly using gold ETFs as a liquidity alternative to physical metals, making ETF capital flows an important indicator of institutional positions.
Bitcoin and gold face the same yield problem
Bitcoin's decline further strengthens the growing short-term correlation between the two assets. Neither Bitcoin nor gold generate interest gains. When government bond yields climbed near 5%, the attractiveness of government bonds relative to these two assets increased significantly.
The decline occurred just days after the "bitcoin-gold ratio" reached about 18, a month after Bitcoin had significantly outperformed gold.
The oil market adds another layer of complexity to the situation. As supply risks in the Middle East intensify, Brent crude oil prices exceed the $100 mark, directly exacerbating inflation concerns. Recent market analysis shows that crude oil prices have rebounded rapidly from a low of nearly US$72 in July, demonstrating strong resilience.
The next key test will be announced on Friday in the U.S. Consumer Price Index (CPI) report. For gold, the core question is whether record ETF demand can regain dominance after the interest rate shock recedes; for Bitcoin, if inflation data exceeds expectations again, it may continue to put pressure on risky assets and cause competitive pressure from nearly 5% U.S. bond yields persist.
