The CPI (Consumer Price Index) measures how much more expensive everyday things are getting compared to a year ago. If CPI is 3.3%, that means on average, prices are 3.3% higher than last year. The Federal Reserve targets 2% — above that, inflation is considered too high.
How does it affect gold?
Gold is the original inflation hedge. When prices rise faster than expected, people buy gold to protect their purchasing power — because gold holds its value while paper money loses it.
High CPI → investors worry inflation is out of control → they buy gold → gold price rises.
But it's more nuanced: what really matters is whether inflation is *surprising* the Fed. Unexpected inflation spikes are more bullish for gold than inflation the Fed has already priced in.