On Wednesday, June 10, the US inflation reading is either a floor or a trapdoor for Bitcoin and gold investors.
The US Consumer Price Index (CPI), the monthly measure of inflation across the economy, is a key indicator for several markets to watch on Wednesday.
Another Fed Signal
There is now a 70% chance of a Federal Reserve rate hike by December, up significantly over the past week, after the May jobs report added 172,000 positions, beating the forecast of 85,000.
Bitcoin trades at $62,747, down from $82,000 at its May peak. Gold sits near $4,330, its lowest since late March. Both assets have moved lower as rate-cut expectations flipped to rate-hike expectations.
What a Hot CPI Print Means for Bitcoin and Gold
The Federal Reserve targets 2% inflation. The current CPI is 3.3%, according to the latest Bureau of Labor Statistics (BLS) data, above the Fed’s target.
Kevin Warsh, the Fed Chair, sworn in on May 22, has committed to tighter inflation discipline. Cleveland Fed President Beth Hammack reinforced that stance, warning the central bank may need to act soon to bring inflation back to target.
A CPI reading above analyst expectations would push rate hike odds above 80%, up from 70% currently. Both Bitcoin and gold suffer when rates rise: higher rates make yield-generating assets, such as Treasury bonds, more attractive compared to assets that pay no yield.
What if the Numbers Come in Lower?
A softer CPI reading reduces the urgency of a rate hike and removes the primary pressure pushing both assets lower. For gold, the case Wall Street’s biggest banks have built around $5,400-$6,300 year-end targets, depending on inflation cooling toward the Fed’s target. A lower print reveals the thesis.
For Bitcoin, the May sell-off traced to the collapse in rate-cut expectations, specifically the assumption that easy monetary policy would return. A softer inflation number partially restores that assumption.
The Bureau of Labor Statistics publishes CPI data at 8:30 AM Eastern on Wednesday. Bitcoin at $62,747 and gold at an 11-week low are both priced for uncertainty. One number resolves it, in one direction or the other.
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