Gold Rebounds as Trump’s Fed Move Sparks Fears Over Central Bank Independence

Economic

Commodity

Summary:

Gold prices rose after President Trump attempted to fire Fed Governor Lisa Cook, intensifying concerns about the Federal Reserve’s independence and boosting safe-haven demand...

Gold Reclaims Momentum on Political Turbulence

Gold regained upward momentum in early Asian trading on Tuesday, reversing earlier losses after President Donald Trump publicly announced his intent to remove Federal Reserve Governor Lisa Cook. The surprise move, posted late Monday on Trump’s Truth Social account, spooked markets by raising the specter of increased political interference in U.S. monetary policy a dynamic often favorable to gold, which thrives on uncertainty and loss of institutional trust.

Spot gold jumped as much as 0.6%, trading at $3,377.24 per ounce in Singapore, while the Bloomberg Dollar Spot Index dropped 0.2%. The decline in the U.S. dollar, alongside falling short-term Treasury yields, created additional tailwinds for the precious metal, which is priced in dollars and offers no yield.

Political Pressure and Institutional Risk Fuel Bullion Demand

Trump’s intensifying efforts to reshape the Fed already under pressure to cut rates amid slowing growth and rising trade tensions have rattled confidence in central bank autonomy. His push to replace Cook, who is facing unproven mortgage fraud allegations, would allow him to secure a four-seat majority on the seven-member board. This move follows his recent appointment of Stephen Miran, a known critic of Fed independence.

Analysts warn that such developments suggest future appointments may align more closely with Trump’s push for looser monetary policy a shift that undermines the Fed’s inflation-fighting credibility and increases institutional risk. As Charu Chanana of Saxo Capital Markets noted, gold is now benefiting from two simultaneous forces: increased expectations for rate cuts and investor hedging against long-term systemic threats.

Market Positioning and Outlook

Gold has already rallied more than 25% year-to-date, much of it during the first quarter when geopolitical and trade tensions peaked. However, prices have recently stalled below the April high of $3,500/oz, as traders waited for a new catalyst. Trump’s latest move could provide one.

Still, the upside potential for gold remains sensitive to macro data. Attention now turns to Friday’s U.S. Personal Consumption Expenditures (PCE) report the Fed’s preferred inflation gauge. Core PCE, which strips out food and energy, is expected to rise at its fastest pace in five years. A strong number could limit the central bank’s flexibility to ease policy, potentially capping further gains in gold.

Broader Metals Market Reaction

Beyond gold, silver tracked higher, while platinum and palladium traded flat. In industrial metals, copper rose 0.6% to $9,853/ton on the LME, boosted by positive sentiment in the broader commodities complex. In contrast, iron ore fell 0.4% to $102.85/ton, and steel futures on the Dalian and Shanghai exchanges softened amid fading demand signals in China.

Gold's latest bounce underscores its dual role as both an inflation hedge and a political risk barometer. With Trump pressing harder to steer Fed policy toward rate cuts, and institutions like UBS and Citi forecasting more upside for gold later this year, bullion may be entering another leg higher especially if data or political disruption limits the Fed’s room to maneuver.

Source: Bloomberg

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