Bitcoin tops $85,000 and gold jumps as US inflation cools to 3.4%

Bitcoin topped $85,000 and gold jumped within minutes of Wednesday's US inflation data. Gold's rise ended a week-long downtrend. The personal consumption expenditures (PCE) price index rose 3.4% from a year earlier, below the 3.7% forecast and down from July's 3.7% reading. The Federal Reserve closely watches the PCE index. Core PCE, which excludes food and energy, rose 3.0%, below the 3.3% consensus forecast. Monthly core prices rose 0.2%, below the 0.3% forecast. Monthly headline PCE rose 0.3%, in line with estimates. The Fed is raising rates and was watching this report ahead of its October 27 and 28 meeting. On September 16, the Fed raised rates by 0.25% to a range of 3.75% to 4.00%, its first increase since 2023. Of 18 Fed officials, 16 projected at least one more increase before year-end. CME FedWatch data showed a 72.5% chance of an October increase as of September 28. The chance was less than 40% at the time of writing. The US Dollar Index was having its best month since June amid signals that the Fed favored higher rates. The softer inflation reading weakens the case for another rate increase. Lower odds of a rate increase tend to support Bitcoin by easing pressure from Treasury yields. Higher rates tend to reduce gold's appeal because gold pays no interest. Bank forecasts had flagged a possible technical effect on the inflation reading and expected monthly core PCE of around 0.27%. The Bureau of Economic Analysis changed how it calculates prices in three components. The change was expected to reduce August's annual figure by a few tenths of a percentage point. However, gross domestic product grew at a 2.2% annual rate in the second quarter, above the 1.5% forecast. Inflation-adjusted consumer spending rose 0.6% in August, its biggest monthly gain since March 2025. The September jobs report on Friday is the last major data release before the Fed meeting. Policymakers will weigh cooler inflation against strong spending and growth.