Key Takeaways
- Gold prices fell 0.5% to $3,338.34 an ounce following stronger-than-expected U.S. wholesale inflation data, which reduced the likelihood of a September Federal Reserve rate cut to 85%. This development pushed bond yields and the dollar higher, while ongoing tariff-related uncertainties continued to weigh on bullion markets.
- Bitcoin tumbled over 4% from a fresh record high after the hot U.S. inflation data and Treasury Secretary Scott Bessent's announcement that the government would not purchase additional tokens for President Trump's crypto reserve, shaking market sentiment.
- Richmond Federal Reserve Bank President Thomas Barkin indicated that slower labor force growth is not yet driving significant wage pressure and suggested that firms might increasingly turn to Artificial Intelligence (AI) to cut labor costs if needed.
- Brazilian Congressman Eduardo Bolsonaro stated he expects more U.S. sanctions and visa curbs on Brazilian officials, warning of potential higher tariffs, citing concerns over Brazil’s Supreme Court and the need for trade talks to address a wider institutional crisis.
Gold and Crypto Markets React to Inflationary Pressures
Gold (XAU) experienced a notable decline of 0.5%, settling at $3,338.34 an ounce, as robust U.S. wholesale inflation data dampened expectations for an imminent Federal Reserve rate cut. The Producer Price Index (PPI) surged by 0.9% in July, tripling economists' forecasts and pushing the annual wholesale inflation rate to 3.3% from 2.4% in June. This hotter-than-expected inflation reading caused bond yields and the dollar to strengthen, making non-yielding gold less attractive. The odds for a September Fed rate cut were subsequently cut to 85%.
Similarly, Bitcoin (BTC) saw a significant downturn, falling over 4% from its recent record high of $124,210. This sharp drop was primarily triggered by the surprising U.S. inflation figures and a clarifying statement from Treasury Secretary Scott Bessent. Bessent announced that the U.S. government would not purchase more Bitcoin for its strategic reserve, instead relying solely on confiscated assets to build it up, currently valued between $15 billion and $20 billion. This dashed hopes among some investors for direct government-led demand.
Fed's Barkin Comments on Labor, AI, and Tariffs
Richmond Federal Reserve Bank President Thomas Barkin offered insights into the U.S. labor market and economic outlook. He noted that while business sentiment has improved in some areas, hiring has not yet picked up, with firms holding back on new hires. Despite this, Barkin stated that the 4.2% unemployment rate is "not a bad number," and that the unemployment rate has been "remarkably stable," with slowing job gains matched by slowing labor force growth.
Barkin also suggested that companies might increasingly adopt AI as a strategy to reduce labor costs if economic pressures intensify. Regarding tariffs, he indicated that it's "early days" for companies to fully adjust their supply chains. He also pointed out that consumers' willingness to "trade down" could limit firms' ability to pass on tariff-related price increases.
Brazil-U.S. Tensions Escalate Over Sanctions and Tariffs
Geopolitical tensions are escalating between Brazil and the United States. Brazilian Congressman Eduardo Bolsonaro, son of former President Jair Bolsonaro, stated his expectation of additional U.S. sanctions and visa restrictions on Brazilian officials. He warned that higher tariffs could also be imposed, emphasizing that trade discussions must address a broader institutional crisis, particularly concerning Brazil's Supreme Court.
Bolsonaro's lobbying efforts in Washington aim to pressure Brazil's Supreme Federal Court (STF) amid his father's legal challenges. He has advocated for measures against judges involved in his father's trial, including expanding sanctions beyond Justice Alexandre De Moraes to his wife and allies, and revoking more visas. These developments highlight ongoing political and economic uncertainties impacting international relations.
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications.