Gold and Bitcoin lead gains in inflation hedges after biggest jump in CPI in 3 decades

Bitcoin on a pile of gold.

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The CPI red hot report Wednesday prompted investors to hedge against old and new inflation, as stocks and bonds came under pressure.

price Bitcoin It rose 1% and hit a record high on Wednesday morning, trading near $68,000. ether Added just under 1%. instant gold It was also higher, jumping 0.8%, while silver jumped more than 1%. Treasury inflation-protected bonds also rose.

“You still have the market trying to figure out how that could happen if we get more inflation reports showing it continuing,” said Ed Moya, senior market analyst at Oanda. “You’ve got a lot of people thinking that we could see a policy error from the Fed, and that makes a lot of investors nervous.”

The Ministry of Labor said, on Wednesday, that the consumer price index for the month of October rose by 6.2% on an annual basis, Its highest reading in three decades, and up 0.9% per month.

Higher inflation readings can lead investors to look for alternative investments that may hold up better than cash or bonds, which often pay a fixed amount. Stocks can be hurt, especially for companies that don’t have much pricing power, and inflation makes future earnings look less attractive.

Federal Reserve officials and several economists argued earlier in the year that inflation may be “temporary,” but the hot reports have traders betting on Central bank hike rates in 2022. Inflation is still caused by supply chain issues directly linked to the pandemic, such as rising prices for new and used cars, but it has spread to other areas including food, energy and shelter.

“This is now not just focused on used car sales, apparel. You’re seeing expansion across the entire base,” said Andrew Smith, senior investment analyst at Delos Capital Advisors. He said a tight job market along with rising energy prices and supply chain issues is pushing prices up.

“It all boils down to an inflationary point that shows it is not as temporary as it was thought,” Smith added, adding that the increase in beef prices was an example of where employment problems drive up prices for consumers.

The Fed announced last week that it would begin reducing its monthly asset purchases, a process known as “tapering,” but Fed Chair Jerome Powell maintained a pessimistic stance on inflation. This caused Treasury yields to fall before they jumped again on Wednesday.

“Every time we have a trend in yields, you get opposition from the Fed. Ultimately it will be interesting to see if the Fed can cut that again,” Moya said. “The more we see it, the more difficult it becomes.”

to make sure that dollar index – which measures the US dollar against a basket of currencies – rose slightly on Wednesday, indicating that inflation pressures are global and confidence about US economic growth is supporting the dollar.

Popular exchange-traded funds (ETFs) linked to bitcoin and gold were higher. The ProShares Bitcoin Strategy ETF (BITO)The first fund to track Bitcoin futures, rose 0.4%. The SPDR Gold Shares (GLD) 0.8% profit.

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