August CPI: Sticky Inflation Unlikely to Stop Fed Rate Cuts

Daily News Nuggets | Today’s top stories for gold and silver investors
September 12th, 2025

Inflation Ticks Higher, But Fed Cut Still On Track

August’s inflation report was a shade hotter than expected. Headline consumer prices rose 2.9% year-on-year, up from 2.7% in July, while the month-over-month increase was 0.4%, driven in part by higher energy costs. Gasoline climbed about 0.6% for the month, and food-at-home expenses continued to rise, keeping pressure on household budgets.

Despite the uptick, the data are not strong enough to derail the Federal Reserve’s anticipated easing cycle. Core inflation, which excludes volatile food and energy components, held at roughly 3.1% annually and rose 0.3% for the month—largely in line with consensus forecasts. Markets reacted only modestly, and traders remain positioned for a quarter-point rate cut at the next Fed meeting. Policymakers appear increasingly focused on slowing labor market momentum rather than modestly higher prices, a shift that tends to favor gold and other safe-haven assets.

Gold Eyes Fourth Straight Weekly Gain

Gold is on pace for a fourth consecutive weekly advance, trading comfortably above $3,650 per ounce and hovering not far below Tuesday’s record high near $3,674. The metal’s persistence is notable because it’s climbing even as U.S. Treasury yields remain relatively firm—an environment that typically pressures non-yielding assets like gold.

Investor sentiment has been buoyed by political calls for lower interest rates and renewed central bank purchases. ETF inflows have returned after a period of outflows, and futures activity shows December contracts approaching the $3,700 mark. Some analysts see this move as part of a broader structural shift: rising demand from central banks, improving physical market dynamics, and geopolitical uncertainty. Those factors are prompting major institutions to lift price targets, reinforcing momentum as portfolio managers adjust allocations.

Labor Market Weakness Takes Center Stage at Fed

The Federal Reserve’s focus has shifted squarely toward employment conditions. Recent labor data show notable cooling: weekly jobless claims climbed to 263,000—the highest level since October 2021—while August payrolls increased by only about 22,000. The three-month average of payroll gains has fallen to roughly 29,000, a dramatic slowdown from the rapid hiring seen in earlier years.

Compounding the concern, a large downward revision to prior months’ job counts revealed nearly a million fewer jobs were created through March than previously reported. Economists warn that these revisions make the timing of a rate-cutting cycle more complicated. For precious-metals investors, weakening labor-market metrics increase the likelihood of aggressive Fed easing, a policy backdrop that typically supports higher gold prices.

Fed’s Confidence Cracks as ‘Fear Meter’ Climbs

Federal Reserve officials are increasingly worried about the risk of economic stagnation rather than runaway inflation. Internal measures of uncertainty and concern—sometimes described informally as a “fear meter”—have risen as hiring has narrowed across industries and certain demographic groups have seen meaningful increases in unemployment. For example, unemployment among Black workers has climbed notably since earlier in the year, and overall job openings are down significantly from 2023 highs.

On the plus side, the expected inflation pass-through from tariffs has been less pronounced than feared, which gives policymakers room to prioritize jobs and growth. Some strategists are discussing larger-than-typical rate cuts, though most market participants expect a standard 25 basis point reduction. In practice, a Fed that shifts toward supporting growth tends to be favorable for gold, and Wall Street positioning is increasingly reflecting that scenario.

UBS Lifts Gold Price Target to $3,800

UBS has raised its gold price target to $3,800 per ounce for late 2025, joining other bullish forecasts from major financial firms. The bank cites a confluence of supportive factors: continued accumulation by central banks, a slowing U.S. growth outlook, renewed positive ETF flows, persistent government deficits, and constraints on physical supply. Structural developments—such as streamlined gold import/export licensing in some large consuming countries—could further boost demand.

Even if headline inflation moderates, UBS argues that fiscal pressures and limited physical availability will keep upward pressure on prices. Forecast upgrades by leading institutions can become self-reinforcing as asset managers rebalance toward precious metals, amplifying momentum in an already strong market.