Gold Holds Ground as U.S. Inflation Data Keeps Fed in a Tight Spot
Sunday, August 17th 2025
Gold prices steadied on Tuesday after U.S. consumer inflation data showed persistent price pressures, leaving the Federal Reserve caught between fighting inflation and supporting a slowing labor market.
Inflation Snapshot
Fresh numbers from the U.S. Bureau of Labor Statistics revealed that the Consumer Price Index (CPI) rose 0.2% in July, following June’s 0.3% gain—exactly in line with market forecasts. On a year-over-year basis, headline inflation climbed 2.7%, coming in just under the 2.8% analysts had anticipated.
The core CPI—which strips out volatile food and energy prices—also met expectations, rising 0.3% for the month. Annual core inflation, however, came in slightly hotter than predicted at 3.1% versus the 3.0% forecast.
What’s Driving Prices
Price increases were broad-based, touching sectors from medical care to air travel, recreational services, household goods, and even the used vehicle market. Shelter costs rose 0.2%, making them the single largest contributor to the monthly headline figure.
Energy costs offered some relief, with the overall energy index down 1.1% in July and gasoline prices falling 2.2%. Over the past year, energy prices have dropped 1.6%, but food costs have climbed 2.9%.
Gold’s Response
In the immediate aftermath of the report, spot gold firmed, trading near $3,344.10 per ounce, essentially flat on the day but well off intraday lows. Despite higher inflation’s usual dampening effect on gold—by potentially prompting tighter Fed policy—investors continue to bet on a September rate cut.
The reasoning is simple: while inflation remains elevated, recent weak labor market data suggests the Fed might prioritize economic growth over aggressive inflation control, thereby reducing real yields and improving gold’s appeal as a non-yielding asset.
Market Voices
Larry Tentarelli, Chief Technical Strategist at Blue Chip Daily Trend Report, warned that consecutive months of rising annual inflation could complicate the Fed’s decision-making.
“If the jobs market deteriorates sharply before September 17, a rate cut is possible,” he noted. “But without a big labor shock, the Fed may lean toward holding rates steady.”
Jeffrey Roach, Chief Economist at LPL Financial, sees it differently.
“Even with core inflation inching higher, the Fed is likely to move ahead with a rate cut next month,” he said. “We’re in a slower-growth environment, and that combination of sticky inflation with weak labor conditions points toward a stagflation-lite scenario.”
Bottom Line
With gold less sensitive to short-term inflation moves and more influenced by the broader rate outlook, traders are watching labor market indicators just as closely as price data. If the Fed tilts dovish in September, gold could find renewed momentum—especially if real yields continue to drift lower.
