Can Recent US Inflation Data Revive Gold Prices Past $3,250?

Gold prices held steady above the critical $3,250 per ounce mark on May 13, 2025, showing signs of potential upside after softer-than-expected US inflation data hinted at possible Federal Reserve rate cuts to bolster a weakening economy. The yellow metal is trading at $3,255.605 per ounce at the time of writing.

The US Bureau of Labor Statistics reported that April’s Consumer Price Index (CPI) rose by just 0.2% month-over-month, following a 0.1% decline in March, missing economists’ expectations of a 0.3% increase. This development, coupled with a broader slowdown in annual inflation, has sparked modest buying in gold, though prices remain range-bound, with spot gold last trading at $3,244.90 per ounce, up 0.25% for the day.

The CPI data revealed headline inflation at 2.3% year-over-year, down from 2.4% in March and marking the smallest 12-month increase since February 2021, while core CPI, excluding food and energy, held steady at 2.8%, also below the forecasted 0.3% monthly rise. Despite the cooling inflation, market expectations for the Federal Reserve to maintain its current 4.25%-4.50% interest rate range in June remain unchanged at 61.4%, though some economists suggest the data provides room for a more dovish stance if economic weakness persists. Rising shelter costs, up 0.3% and driving over half of the monthly CPI increase, were offset by a 3.7% drop in energy prices, offering consumers some relief amid broader price pressures.

Gold’s muted reaction reflects competing market forces, as improved US-China trade relations, following a 90-day tariff suspension lowering duties to 10% on US goods and 30% on Chinese imports, have bolstered risk-on sentiment, overshadowing economic data. This trade détente has supported equities, with the Dow Jones gaining 2.4% to 42,220 points, potentially diverting investor focus from safe-haven assets like gold. However, the persistent uncertainty surrounding the temporary trade deal’s longevity poses risks of stagflation, complicating the Fed’s policy decisions and keeping gold’s upside potential in check as markets await clearer signals.

The broader inflation trend and global trade dynamics will be pivotal for gold’s trajectory, as the metal remains sensitive to shifts in monetary policy expectations and economic uncertainty. While the latest CPI data has not yet shifted the Fed’s neutral stance, the cooling inflationary pressure could pave the way for rate cuts if US economic indicators continue to soften, potentially reigniting gold’s appeal. For now, gold’s ability to hold above $3,200 suggests a resilient base, but a breakout will depend on whether the Fed can navigate the uncertain trade landscape and provide the clarity markets crave.