Eroding Fed credibility could be gold’s next catalyst, analysts warn

Commodity

Economic

Summary:

Rising tensions between Trump and the Fed are undermining its credibility, fueling fears of political interference. Analysts warn this could trigger a dollar selloff and spark a major rally in gold.

Rising political tensions between President Trump and the Federal Reserve are rattling investor confidence, with analysts warning that any blow to central bank independence could send gold prices soaring.

President Donald Trump has never been shy about expressing his disapproval of Federal Reserve Chair Jerome Powell, as Powell maintains the central bank’s current neutral monetary policy stance. Trump recently stated that interest rates should be at least 3% lower, which would place them in a range between 1.25% and 1.50%.

Over the past several months, Trump has launched personal attacks, calling Powell a “dumb guy,” a “moron,” a “knucklehead,” and nicknaming him “Mr. Too Late.” However, the rhetoric has intensified in recent days.

On Friday, William Pulte, Chairman of the Board of Fannie Mae and Freddie Mac, helped spread false rumors that Powell was considering resigning.

“I’m encouraged by reports that Jerome Powell is considering resigning. I think this will be the right decision for America, and the economy will boom,” he said in an official statement.

It was also revealed that Trump spoke with Republican lawmakers on Tuesday about potentially firing Powell, but he later backtracked, saying that it was “highly unlikely.”

The uncertainty surrounding central bank leadership is injecting new volatility into markets, and analysts say this environment will only worsen as concerns about the Federal Reserve’s independence grow.

In a note published Thursday, Ipek Ozkardeskaya, Senior Analyst at Swissquote Bank, described the Federal Reserve’s independence as its “superpower.”

“The consequences of such an attack on the Fed’s independence could be dramatic. Not only would the US dollar and Treasuries tumble, but the Fed would lose a superpower: the one that helps it support turmoiled financial markets by buying billions of dollars in US debt,” she said. “Remember, the US—and a few privileged economic zones—are unique in that government bonds can be supported by their central banks purchasing their debt. This is due to credibility. If that credibility is lost, the Fed loses its most important tool. If QE and the Fed’s expanding balance sheet have worked so well over decades, it’s because the Fed enjoys a level of credibility that few others do. If that credibility disappears, lowering rates would severely hurt both the dollar and Treasuries.”

In this environment, Ozkardeskaya advised investors to keep an eye on safe-haven assets, noting, “it looks like we might see some serious action at the Fed this fall.”

She pointed to Turkey’s central bank as an example of an institution that lost credibility after losing its independence. From 2018 to 2023, Turkish President Recep Tayyip Erdogan pursued a policy of continuous interest rate cuts and currency intervention, even as inflation soared out of control.

Michael Brown, Senior Market Analyst at Pepperstone, also cited Turkey’s economic turmoil as a warning for U.S. investors. He added that such an environment would be favorable for gold.

“When one has to reach for Turkey as an analogy for how monetary policy could end up being set, it isn’t exactly a promising, or reassuring, sign,” he said in a note. “And, in any case, yesterday’s reaction supports my longer-running bearish view: selling rallies in the greenback as any and all pretense of monetary policy independence continues to be eroded, in rather rapid fashion.”

“It appears that the administration is seeking to erode every last shred of monetary policy independence—either right now or via the appointment of Powell’s successor next May,” Brown said in a comment to Kitco News. “Either way, this is going to keep international investors spooked and ensure that reserve allocators continue to seek alternatives to the greenback. Obviously, this is where gold can shine.”

Naeem Aslam, Chief Investment Officer at Zaye Capital Markets, said he is bullish on gold as the turmoil at the Fed adds to growing geopolitical uncertainty across financial markets.

“If political tensions rise even higher and the Federal Reserve faces more pressure from the White House, the most likely scenario would be increased volatility in the market. Gold, given its past role as a safe haven in times of political and economic volatility, would likely see more use as a store of value,” he said.

Jim Wyckoff, Senior Market Analyst at Kitco.com, also said he expects gold to rally if Trump follows through with his initial threat to fire Powell.

“Trump firing Powell would surprise the marketplace and drive safe-haven demand to gold, which in turn would likely pressure the U.S. dollar index—at least initially,” he said.

Some analysts suspect that Trump’s remarks were an attempt to test the waters on changing the Fed’s leadership. Marc Chandler, Managing Director at Bannockburn Global Forex, said the trial balloon floated “as well as a lead zeppelin.”

Analysts also note that the central bank drama is just the latest addition to a growing list of fundamental factors supporting gold. Like Trump’s ongoing trade war, they say anything that threatens the U.S. dollar’s role as the world’s reserve currency will ultimately drive gold prices higher.

While investment demand has increased this year, analysts emphasize that central bank demand remains a critical factor behind gold’s historic rally over the last three years. Some expect global central banks to boost gold reserves by another 1,000 tonnes this year—for the third consecutive year.

While market analysts at TD Securities say it is unlikely Trump would be able to fire Powell before his term expires in May 2026, they suggest that creating a "shadow chair" on the committee might be an option. However, they caution that this would have a similar disruptive effect on broader financial markets.

“In this scenario, monetary policy guidance will be diluted, as there will be no central message to rely on, which will complicate one of the avenues the Fed uses to manage expectations,” the analysts wrote. “A shadow Fed Chair could be the next big worry for the USD, especially given the financing risks of the widening fiscal deficit. This would serve to shorten the path to the FX value trade (USD selloff) if the Fed starts to lose credibility. This could usher in the next leg lower for the USD, accompanied by a steeper curve and further reversal of the historical relationship to the US 10-year rate.”

Source: kitco

To stay updated on all economic events of today, please check out our Economic calendar

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Stocks

Britain's stock market finally appears to be reversing years of underperformance against the rest of Europe, as a UK/U.S. trade deal, lighter regulation and cheap stocks deliver juicy returns that are starting to attract foreign investors.

The FTSE 100 has gained nearly 10% this year to hit record highs this week, beating the STOXX 600, which is up 7.5%.

On a year-to-date basis, London's blue-chip index has performed better than its European counterpart for the last six weeks, its longest such stretch since late 2022, when a weak pound beefed up revenues for the export-focused FTSE.

This week, the financial regulator said it will roll out new rules to boost Britain's capital markets, while Chancellor Rachel Reeves told the financial industry to paint a less negative picture of UK stocks for would-be retail investors, as she seeks new ways to revive a stagnating economy.

For foreign investors, the blue-chip index is already looking appealing given sterling's rally this year, while asset managers say the narrative around the UK is shifting.

"We are seeing signs of big asset allocators coming back to the UK," Justin Onuekwusi, chief investment officer at St. James's Place. "I am talking about non-UK endowments, pension funds, asset owners, wealth managers who were all very underweight the UK post-Brexit," he said.

In dollar terms, the FTSE-100 is up nearly 18% so far this year, set for the biggest dollar-denominated returns since 2009, compared with a 6% year-to-date gain in the S&P 500 which has also hit record highs.

The pound , up 7% this year against the dollar as investors turn away from U.S. assets in response to heightened U.S. policy uncertainty under U.S. President Donald Trump, acts as a headwind for FTSE constituents, 80% of whom get their revenues from overseas.

Yet the index's wealth of large defensive companies, including healthcare, utilities and food retailers, help insulate it against swings in the underlying economy, like drugmaker AstraZeneca or supermarket chain Tesco It also has growth-sensitive resource stocks such as Anglo American and BP to tap into strength in oil, copper and gold.

Britain meanwhile is one of the few economies facing less trade uncertainty with a U.S. trade deal in place. In contrast, the European Union faces the threat of 30% tariffs if there is no agreement by August 1.

Foreign investors are warming to London's unloved stocks_1

A bar chart showing the annual percentage change in the FTSE 100 in dollars in orange and the S&P 500 in blue from 1985 to 2025

'TEA AND BISCUIT'

"The UK stock market is the calming cup of tea and biscuit in an uncertain world. There’s nothing fancy on offer, just reliable names that do their job day in, day out," AJ Bell investment analyst Dan Coatsworth said.

Valuations for FTSE-100 companies have lagged those elsewhere in Europe for years.

The 2016 Brexit vote accelerated that trend, with fewer companies using London to list their shares and fewer cropping up as M&A targets, given the political and economic uncertainty that prevailed at the time.

Now the UK market is catching up. The FTSE-100's 12-month forward price-to-earnings ratio of 12.5 is the highest for around five years, compared with 14.11 for the STOXX, the narrowest gap in around 18 months, LSEG data shows.

The S&P trades at a ratio of 23, a near-10 point premium to the FTSE, compared with under 2 points 10 years ago.

"The relatively poor performance we’ve seen in the UK versus particularly the U.S. over the past two years has begun to unwind. We’re in the foothills of that," Michael Stiasny, head of UK Equities, M&G Investments, said, adding that the UK market has traded at a "significant discount".

The pound is close to a four-year high against the dollar, but has weakened against the euro this year , offering a tailwind to the FTSE's big exporters.

The EU is Britain's largest trading partner, accounting for 41% of exports in 2024, followed by the United States, with 22%, according to official data.

It isn't all rosy. The British economy is flagging, inflation is well above the Bank of England's target of 2% and business activity and employment are slowing.

Barclays data shows UK equities have seen a net outflow of $20 billion in 2025, although outflows have almost dried up in the last month, compared with Europe's year-to-date inflow of $13 billion and rapidly slowing inflows.

Sebastian Raedler, head of European equity strategy and Bank of America Merrill Lynch, said he felt the FTSE's strong run was a function of the currency and in line with the rest of Europe.

"Net-net, the FTSE has mildly outperformed, but I would say in an environment where there are a lot of big stories ... a 2% (out)performance of the UK this year would rank further down the radar from my perspective," he said, referring to the percentage gain in the FTSE in 2025 versus that of the STOXX.

Foreign investors are warming to London's unloved stocks_2

Two blue lines showing the P/R ratios for the STOXX 600 and FTSE 100 indices

Source: reuters

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Adam

Stocks

Income investors seeking stocks with stable dividends should focus on companies with a proven track record of dividend increases. Investors can generate rising dividends from stocks that have established track records of growing their dividends year after year, even during recessions.

Blue-chip stocks are established, financially strong, and consistently profitable publicly traded companies. Their strength makes them appealing investments for comparatively safe and reliable dividends and capital appreciation, versus less established stocks.

We define blue-chip stocks as those with at least 10 consecutive annual dividend increases. These three blue-chip stocks have reliable dividends and steady dividend growth.

Target Corporation

Target Corporation (NYSE:TGT) is a general merchandise retailer that operates in the US. The company offers a vast assortment of food products, including dry groceries, dairy, frozen items, and perishables. Additionally, Target operates a large apparel business, featuring many of its private labels. The company offers a wide range of electronics, toys, animal care products, home décor, and more.

Target posted first-quarter earnings on May 21st, 2025, and results were quite weak once again. Earnings came to $1.30 per share, which missed estimates by 35 cents. Revenue was also 3% lower from the prior year at $23.8 billion, missing estimates by $550 million. Merchandise sales were off 3.1% year-over-year, partially offset by a 13.5% increase in other revenue.

Digital comparable sales were up 4.7%, with same-day delivery growth of 35%. Strength in Drive Up continues to drive those results. Operating margin was 6.2% of revenue, up from 5.3% a year ago.

Target’s competitive advantage comes from its everyday low prices on attractive merchandise in its guest-friendly stores. The company is not immune to recessions. In 2008, its earnings per share fell by 14%. Nevertheless, that performance was much better than that of most companies, which saw their earnings collapse during the Great Recession. Moreover, it took only one year for Target’s earnings to return to their pre-crisis level.

Therefore, while Target is vulnerable to economic downturns, it is much more resilient than most stocks in such periods. Target is combating this in part with its massive push towards digital sales channels.

Target’s current yield of 4.4% compares quite favorably to the 1.3% yield of the S&P 500. Target has raised its dividend for an impressive 56 consecutive years, placing it in rare company on that measure. The payout ratio is now 61% of earnings for this year, indicating a secure payout.

Black Hills

Black Hills (NYSE:BKH) is an electric utility that provides electricity and/or natural gas to customers in Arkansas, Colorado, Iowa, Kansas, Montana, Nebraska, South Dakota, and Wyoming. Black Hills was founded in 1941, and the company is headquartered in Rapid City, South Dakota.

Black Hills Corp. reported its first-quarter earnings results in May. The company generated revenue of $805 million during the quarter, representing an 11% increase from the same quarter last year. Black Hills Corp. generated earnings per share of $1.87 during the first quarter, which was flat on a year-over-year basis. Q4 and Q1 are typically stronger quarters due to higher natural gas demand for heating, as evidenced by the above-average profitability during the most recent quarter.

Black Hills Corp. forecasts earnings-per-share of $4.00 to $4.20 for the current Fiscal Year. Current guidance implies that earnings per share will hit a new record high this year.

As a utility, Black Hills enjoys a recession-proof business model, as people will always need electricity and gas. Today, the company pays out roughly two-thirds of its net profits in the form of dividends. Its decades-long dividend growth track record assures investors that a dividend cut is unlikely from this utility company. The fact that customers tend to stick with their provider means that Black Hills operates a relatively stable business model. The company should also be able to weather future recessions reasonably well, which creates appeal for more conservative investors.

On average, earnings per share grew by 3% to 4% annually over the past 10 years, which is a solid growth rate for a utility. Black Hills’ growth over the coming years depends on several factors. This includes rate reviews, which drive revenue and profits per kilowatt hour. Rate reviews will enable Black Hills to recover investments in its existing systems, thereby more or less guaranteeing increased revenue over time.

Black Hills Corporation has increased its dividend for 55 consecutive years, which makes it a Dividend King.

Lowe’s Companies

Lowe’s Companies (NYSE:LOW) is the second-largest home improvement retailer in the U.S., behind Home Depot (NYSE:HD). Founded in 1946 and headquartered in Mooresville, North Carolina, the company has a market cap over $120 billion. As of January-end, Lowe’s operated 1,748 home improvement and outlet stores across the U.S., covering about 195 million square feet of retail selling space.

Lowe’s reported first-quarter 2025 results on May 21st, 2025. Total sales came in at $20.9 billion compared to $21.4 billion in the same quarter a year ago. Comparable sales decreased by 1.7%, while net earnings-per-share (EPS) of $2.92 compared to $3.06 in the first quarter of 2024. Lowe’s was negatively impacted by unfavorable weather, partly offset by mid-single-digit comparable sales growth in Pro and online channels.

The company repurchased $112 million of common stock in the quarter. Additionally, it paid out $645 million in dividends. Lowe’s reiterated its Fiscal 2025 outlook and still expects to earn diluted EPS of $12.15 to $12.40 on total sales of $83.5 to $84.5 billion.

Acquisitions are a potential catalyst for Lowe’s growth. On June 2nd, 2025, Lowe’s announced it had closed on the previously announced acquisition of Artisan Design Group (ADG) for $1.325 billion. ADG is a major provider of interior surface design and installation services, such as flooring, cabinets, and countertops, serving homebuilders and property managers across the U.S. It registered $1.8 billion in revenue last year and has a network of over 3,200 installers. The move expands Lowe’s Pro business into a $50 billion market.

Lowe’s has delivered strong EPS growth, with a 15.7% CAGR from 2015 to 2024 and 16.3% over the past five years. Sales growth, margin gains, and share buybacks powered this. We expect EPS growth of around 9% annually over the next five years.

This growth will allow the company to continue raising its dividend, as it has for many years. On May 30th, 2025, Lowe’s increased its quarterly dividend by 4.3%, from $1.15 per share to $1.20 per share. This marked the 62nd consecutive year of increasing dividends for the company.

Lowe’s is a Dividend King; the company has raised its dividend annually for 62 consecutive years, even during recessions, the Great Financial Crisis, and the COVID-19 pandemic. This powerful track record, coupled with the fact that Lowe’s dividend payout ratio is relatively low at 39% for 2025, shows that Lowe’s is a reliable and low-risk dividend stock where investors do not have to worry about a dividend cut. Additionally, the company is likely to experience many years of dividend growth.

Source: investing

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James Whitman

Political

Germany, the Netherlands and Sweden oppose European Union joint borrowing despite mounting global challenges, while Denmark is sceptical, finance ministers from those countries said on the sidelines of a G20 meeting in Durban, South Africa.

Dutch Finance Minister Eelco Heinen said that a 2 trillion euro ($2.31 trillion) EU budget for 2028 to 2034 proposed on Wednesday by the European Commission was way too large and was "dead on arrival".

"I'm not in favour of joint borrowing. The Netherlands has never been and will continue on that path," he told Reuters.

Some members of the 27-country bloc argue that joint debt could help fund the massive EU-wide spending plans that the Commission is seeking, allowing cheap borrowing.

Common borrowing was first used by the EU to help countries pay for the recovery from the coronavirus pandemic. But then, as now, countries such as the Netherlands, Germany and the Nordics resented having to pay for poorer southern countries that they see as lacking fiscal discipline.

Swedish Finance Minister Elisabeth Svantesson said the joint debt to deal with the pandemic was exceptional.

"For us and for the whole parliament, from left to right, it was that we did that once. And that was not to be repeated," she told Reuters.

Danish Minister of Economic Affairs Stephanie Lose said joint borrowing was sometimes presented as being the answer to all problems, but that it was important to remember the money would have to be repaid.

German Finance Minister Lars Klingbeil told Reuters on Thursday that the EU had joint debt in what was a crisis situation but this was not appropriate for resolving the bloc's finances.

"Fortunately, we are not in such a crisis right now," he said.

The 27 nations agreed in 2020 to jointly borrow 800 billion euros for the Next Generation EU programme, the bloc's pandemic recovery plan.

Heinen agreed that fund was a one-off, adding, "never again".

"When that fund was being set up, the Netherlands already said, be careful, because one day that bill will be presented, and that's the moment we're in right now."

($1 = 0.8589 euros)

Source: Reuters

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Adam

Cryptocurrency

The U.S. House of Representatives has passed a package of key cryptocurrency bills championed by President Donald Trump. The most important among them — the GENIUS Act — received bipartisan support (308 votes in favor, 122 against) and, after previously being approved by the Senate in June, now heads to Trump's desk. The bill introduces a regulatory framework for stablecoins, requiring issuers to comply with anti-money laundering and sanctions regulations.

The House also passed the CLARITY Act (defining general crypto market regulatory principles) and the Anti-CBDC Surveillance State Act, which aims to block the creation of a U.S. central bank digital currency (CBDC). The latter two bills are still awaiting Senate approval.

In parallel, Trump is preparing an executive order that would allow $9 trillion in American retirement savings (from 401(k) accounts) to be invested in alternative assets such as cryptocurrencies, gold, and private equity — potentially transforming the structure of the U.S. retirement system.

Crypto market euphoria; Trump signals opening retirement market to digital assets_1

As legislative progress accelerates, the crypto market is booming. Ethereum is up 51% since the beginning of July, and Bitcoin remains above the $120,000 mark. Altcoins are also gaining, supported by growing institutional interest and reports that giants like Walmart and Amazon are considering issuing their own stablecoins to reduce transaction costs. Market leaders are calling these developments a "breakthrough moment," offering hope for regulatory clarity, increased investor confidence, and a green light for widespread crypto adoption.

Crypto market euphoria; Trump signals opening retirement market to digital assets_2

Institutions are allocating increasing capital into Ethereum. Stablecoin adoption could significantly boost demand for the second-largest cryptocurrency. A notable accumulation trend can be seen via BlackRock’s ETF. Source: XTB Research

Ethereum (D1)

Ethereum is seeing strong gains. However, unlike Bitcoin, Ethereum is still over 33% below its previous all-time high set in November 2021.

Crypto market euphoria; Trump signals opening retirement market to digital assets_3

Source: xtb

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James Whitman

Economic

US consumer sentiment rose to a five-month high in early July as expectations about the economy and inflation continued to improve.

The preliminary July sentiment index rose to 61.8 from 60.7 a month earlier, according to University of Michigan data released Friday. The figure still remains below levels seen throughout last year.

Consumers expect prices to rise at an annual rate of 4.4% over the next year, down from 5% in the prior month and the lowest since February. They saw costs rising at an annual rate of 3.6% over the next five to 10 years, also the lowest in five months.

At the same time, concerns about tariffs continue to limit optimism about the outlook for the economy.

“Consumers’ expectations over business conditions, labor markets, and even their own incomes continue to be weaker than a year ago,” Joanne Hsu, director of the survey, said in a statement.

“That said, the recent two-month lift in sentiment suggests that consumers believe that the risk of the worst-case scenarios they expected in April and May has eased,’’ Hsu said.

Consumers’ views of their current personal finances increased, likely supported by the rally in the stock market. The survey concluded on July 14, more than a week after President Donald Trump signed his budget bill into law, extending tax cuts and new breaks for tipped workers.

Still, Hsu said announcements of higher tariffs or a pickup in inflation would likely restrain sentiment.

The survey showed the current conditions gauge rose to 66.8 from 64.8, while the expectations index edged up to 58.6.

The increase in sentiment was driven by Republicans and political independents.

Source: Bloomberg

To stay updated on all economic events of today, please check out our Economic calendar

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Adam

Economic

Central Bank

Federal Reserve governor Christopher Waller made his strongest call yet for a rate cut in July as he again argued that any inflation from tariffs would be temporary, underscoring a divide within the central bank.

"I believe we should cut the policy rate at our meeting in two weeks," Waller said bluntly in a speech in New York Thursday night, referring to the central bank's July 29-30 policy meeting.

He argued that the Fed’s policy rate should be 3%, which is 125-150 basis points lower than the current rate of 4.25%-4.5%.

Waller’s words carry increasing weight since he is considered to be among the candidates to replace Jerome Powell as Fed chair next May, when Powell’s term is up.

He told Bloomberg Friday that if Trump "says 'Chris we want you to do the job' I would say yes" but stressed that the president "has not contacted me."

Waller has been outspoken since the Fed’s last meeting in June about the case for cutting rates sooner rather than later, even saying last week that his opinion was "not political." One of his colleagues, Michelle Bowman, has made the same argument for a July cut.

Their views align with President Trump, who has been hammering the Fed and Chairman Jerome Powell to lower rates by as many as three percentage points.

The case Waller made again on Thursday night is that tariffs offer one-off price increases, allowing the Fed to "look through" them and refocus on the employment side of its dual mandate.

And he favors cutting rates now because while the job market looks fine on the surface, private sector job growth is near “stall speed” and other data suggests downside risks to the job market have increased.

He noted that half of the payroll gain in June reported by the Labor Department came from state and local government, while private payroll employment increases were smaller than in the previous two months.

“With inflation near target and the upside risks to inflation limited, we should not wait until the labor market deteriorates before we cut the policy rate,” Waller said.

The new comments are the latest sign of how opposing camps are now forming inside the central bank over Trump's tariffs and how they should affect the Fed's rate decisions.

Some policymakers are not budging from their view that rates should remain where they are despite intensifying pressure from Trump and his allies to ease monetary policy immediately.

Federal Reserve governor Adriana Kugler and New York Fed president John Williams both made this argument in speeches delivered Thursday and Wednesday, citing the risk of inflation pressure from tariffs.

"With the unemployment rate still at historically low levels, elevated short-run inflation expectations, and goods inflation rising due to the upward pressure from tariffs, I find it appropriate to hold our policy rate at the current level for some time," Kugler said in her Thursday speech in Washington, D.C.

"I judge that inflation is likely to increase further as tariff effects build up during the rest of the year," she added.

On Wednesday night, Williams stressed that he thinks tariffs are already pushing up inflation and that this will increase in the coming months. He expects tariffs will push up inflation by a full percentage point in the second half of this year and into the first part of 2026.

"Maintaining this modestly restrictive stance of monetary policy is entirely appropriate to achieve our maximum employment and price stability goals," Williams said in his speech.

Powell has also argued for more time to assess whether inflation does in fact move higher over the summer, a stance that has frustrated Trump and the White House.

Williams of the New York Fed made a similar argument Wednesday, saying holding rates steady will allow more time to assess the data.

Williams said he anticipates inflation will come in between 3% and 3.5% this year and then fall back to about 2.5% next year before reaching 2% in 2027. The Fed's goal is to get inflation back down to 2%.

Kugler noted that the central bank's still-restrictive policy stance is important to keep longer-run inflation expectations anchored.

She said she has not seen any progress on headline and core inflation over the past six months, noting that goods inflation has gone up, which reflects some pass-through of increased tariffs.

Kugler stressed that businesses may not yet be passing the higher tariffs to their selling prices because they are waiting for greater clarity.

She also noted that tariff rates could increase further, as seen in newly proposed "reciprocal" tariffs on goods from several countries and the new tariffs on copper introduced last week, putting further upward pressure on prices.