Stock Groups

Gold, bitcoin lead gains in inflation hedges following biggest CPI jump in 3 decades


Bitcoin with a mound gold

iStock Editorial – Getty Images| iStock Editorial | Getty Images

The red hot CPI reportOn Wednesday, investors were encouraged to invest in inflation hedges both old and new as bonds and stocks came under increasing pressure.

The cost of bitcoinOn Wednesday, the stock rose 2.2% and traded at a record $68,000. EtherAdditional 1.9% Spot goldAs well as climbing by 1.3%, silver also climbed more than 3%. The inflation-protected Treasury bond also saw a surge.

Ed Moya, Oanda’s senior market analyst said that the market is still trying to understand how this will play out. Many people are speculating that there could be a Fed policy error, which makes many investors nervous.

According to the Labor Department, Wednesday’s October consumer price index rose 6.2% over last year. its highest reading in three decadesThis is an increase of 0.9% over the previous month.

Investors may look for alternatives investments to cash and bonds that pay a fixed sum, in the event of high inflation. Inflation can make future earnings less appealing, which is a problem for stocks, particularly for those companies that don’t have significant pricing power.

Federal Reserve officials, economists and others had argued that inflation would be temporary earlier this year. But traders have been betting on it because of the hot reports. central bank hiking rates in 2022It is. Although inflation is still caused by supply-chain issues that are directly connected to the pandemic (such as high prices for new or used cars), it has now spread to other areas such food, energy, and shelter.

This isn’t about used cars sales. It also includes apparel. Andrew Smith, Delos Capital Advisors chief financial strategist and investment strategist said there was a generalization across the whole base. According to Smith, a weak labor market and rising energy costs were the main factors driving higher prices.

Smith said that all of this was manifesting into an inflationary point, which is showing consumers that it is not transitory.” Smith also stated that Smith pointed out that beef’s rise in prices was an example where labor problems are driving up consumer costs.

Although the Fed had announced that it will begin to reduce monthly asset purchases last week (a process called “tapering”), Fed Chairman Jerome Powell kept a cautious stance regarding inflation. This caused Treasury yields, which had been falling for a while, to rise again on Wednesday.

The Fed pushes back whenever there is a tendency in yields. Moya stated that eventually, it would be fascinating to see if Fed officials can again reduce this. It gets more difficult the more we look at it.”

For your safety, dollar index — which measures the U.S. dollar against a basket of currencies — was up slightly Wednesday, suggesting that inflation pressures are global and confidence about the U.S. economic growth is supporting the greenback.

The popularity of exchange-traded funds that were linked to gold and bitcoin was higher. These are the ProShares Bitcoin Strategy ETF (BITO)The 1.7% gain was attributable to, which is the first Bitcoin futures tracker fund. The SPDR Gold Shares (GLD)Gained 1.2%