Aaron Roberts
Gold prices (tracked by the SPDR Gold Shares ETF, GLD) have held near record territory this year as investors weigh a stubborn inflation problem that refuses to fully cool off. The Consumer Price Index rose 2.9% over the 12 months through August 2025, and that persistent pressure on household budgets is a big reason bullion, silver and other inflation hedges have stayed in demand even as the broader stock market grinds higher.
In Brief
- CPI rose 2.9% year over year through August 2025, with prices up 0.4% for the month alone on a seasonally adjusted basis
- Gold (GLD) and silver (SLV) remain popular inflation hedges as investors seek protection against a weaker dollar
- Real estate (VNQ) and Treasury Inflation Protected Securities offer alternate ways to guard purchasing power
- The Federal Reserve continues to target 2% annual inflation as its long run benchmark
- Commodity markets, including crude oil (USO), often signal inflation trends before they show up in retail prices
What Is Driving Inflation Right Now
Inflation is simply the erosion of money's purchasing power over time, measured by tracking how much a broad basket of goods and services costs from one year to the next. When the CPI climbs 2.9%, as it did for the year ending August 2025, it means the typical household needs roughly that much more income just to buy the same things it bought a year earlier. Economists generally trace the root cause back to the money supply: when it grows faster than the economy's actual output of goods and services, prices tend to rise to absorb the difference.
There are three recognized flavors of this phenomenon. Demand pull inflation happens when spending power outruns what businesses can produce, so prices climb to ration scarce goods. Cost push inflation works from the other direction, when input costs, especially energy, rise and get passed down the supply chain into everything from groceries to airline tickets. Built in inflation is the psychological piece: once workers and businesses expect prices to keep rising, wage demands and price hikes feed each other in a loop that can be hard to break.
Commodities as an Early Warning System
Commodity markets tend to move ahead of consumer prices, which is part of why traders watch crude oil, metals and grains so closely for inflation clues. Energy is the clearest example. When oil prices spike, tracked through vehicles like the United States Oil Fund (USO), the cost of transportation and manufacturing ripples through nearly every finished product, showing up in headline inflation readings weeks or months later.
Precious metals play a different role. Gold and silver, accessible through GLD and SLV, are held by many investors specifically because they tend to preserve value when currencies weaken. That dynamic has deep historical roots: after Spain's conquests in the Americas brought enormous quantities of gold and silver into European economies, the sudden expansion of the money supply helped drive prices sharply higher across the continent. The lesson investors still draw from that episode is that when money becomes more abundant relative to goods, prices adjust upward to compensate.
Real estate offers another layer of protection. Landlords can typically raise rents to keep pace with rising costs, which is one reason property focused funds like the Vanguard Real Estate ETF (VNQ) attract inflation conscious investors. Treasury Inflation Protected Securities, meanwhile, adjust their principal directly based on CPI changes, giving savers a government backed way to keep purchasing power intact without betting on any single commodity.
How Analysts Measure the Damage to Your Wallet
The Bureau of Labor Statistics has tracked the Consumer Price Index since 1913, and the modern CPI-U version introduced in 1978 covers spending patterns for about 88% of the noninstitutional US population. Producers get their own gauge, the Producer Price Index, which measures price changes from the seller's side rather than the buyer's, capturing cost pressures before they reach store shelves.
The math behind these measures is straightforward once you see it laid out. To find the percentage change in prices between two dates, divide the later CPI value by the earlier one, subtract one, then multiply by 100. Applying that formula to January 1975 (CPI of 52.1) and January 2025 (CPI of 317.671) produces [(317.671 ÷ 52.1) minus 1] times 100, or roughly 509.9%. That means prices overall rose about 510% over that half century.
A related formula converts old dollar amounts into today's equivalent purchasing power: multiply the original amount by the ratio of the final CPI to the initial CPI. Using the same 1975 and 2025 figures, $10,000 saved in 1975 would need to grow to roughly $60,988 in 2025 just to buy the same amount of goods and services. That single number captures, in plain terms, why sitting entirely in cash for decades tends to be a losing strategy.
| Measure | What It Tracks | Reported By |
|---|---|---|
| CPI | Retail prices paid by consumers | Bureau of Labor Statistics |
| PPI | Prices received by domestic producers | Bureau of Labor Statistics |
| WPI | Wholesale/producer level prices (used outside the US) | Varies by country |
Who Wins and Who Loses When Prices Rise
Inflation is not uniformly bad news. Anyone holding tangible assets, property, stockpiled commodities, even shares in companies with pricing power, tends to benefit as those assets appreciate alongside general price levels. That is one reason equities, tracked broadly through funds like the SPDR S&P 500 ETF (SPY) or the Invesco QQQ Trust, are often described as a reasonable long run inflation hedge: corporate revenues and asset values tend to rise with the price level even if profit margins fluctuate.
Borrowers also come out ahead in an inflationary environment, since the real value of a fixed debt shrinks as prices rise. Savers holding cash or long dated bonds face the opposite problem. This is part of why longer duration Treasuries, tracked through the iShares 20+ Year Treasury Bond ETF (TLT), tend to struggle when inflation expectations climb: fixed interest payments become less valuable in real terms, and bond prices adjust downward to compensate.
The Federal Reserve's dual mandate, price stability alongside maximum employment, exists precisely to manage this tension. Following the 2008 financial crisis, the Fed held rates near zero and ran a bond buying program known as quantitative easing. Critics warned it would ignite runaway inflation, but price growth actually peaked in 2007 and drifted lower over the following eight years, since the recession itself was deeply deflationary and QE mainly offset that pull. Policymakers have since aimed for roughly 2% annual inflation as the sweet spot, a target shared by the European Central Bank, while faster growing economies like India (targeting near 4%) and Brazil (near 3%) tolerate somewhat higher rates given their stronger underlying expansion.
Where Prices Go From Here
The 2.9% annual CPI reading through August 2025 sits above the Fed's 2% target but well below the peaks seen when inflation surged worldwide in 2022 amid pandemic supply disruptions and the shock to energy and grain markets following Russia's invasion of Ukraine. Whether the current pace settles closer to target or proves stickier will likely keep shaping demand for gold, silver, real estate and inflation protected bonds in the months ahead, particularly if oil prices or dollar weakness reassert themselves as forces investors have to price in.
Oliver Davis
Trevor Harris
Tara Burke