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Gold hit a report $3,500 a troy ounce for the primary time on Tuesday, as Donald Trump’s sustained assault on US Federal Reserve chair Jay Powell added to fears over the central financial institution’s independence and the prospects for the world’s largest financial system.
In a rush to haven belongings, gold climbed as a lot as 2 per cent to $3,500.10, cementing its place as one of many greatest winners from Trump’s return to the White Home. The Japanese yen strengthened to ¥140 per greenback for the primary time since September, because the greenback index languished close to a three-year low.
In a put up on his Reality Social platform on Monday, Trump branded Powell “Mr Too Late” and urged the central financial institution to decrease borrowing prices “NOW”. The wave of criticism comes after Powell warned final week that the administration’s sweeping tariffs would result in slower progress and better inflation.
Trump “ratcheting up pressure on Powell to ease monetary policy is raising concerns about Fed independence, which has triggered a flight to haven assets,” stated Ewa Manthey, a commodities strategist at ING.
The most recent Trump salvo is deepening buyers’ concern that the stress between the president and the Fed dangers spilling into financial coverage and rattling the $29tn Treasuries market, the bedrock of the worldwide monetary system.
“Removing Fed independence would be another blow to the hard won credibility of America’s financial institutions,” stated Trevor Greetham, head of multi-asset at Royal London Asset Administration.
Trump’s broadside on Monday despatched the S&P 500 down 2.4 per cent and the tech-heavy Nasdaq closed 2.6 per cent decrease. The Stoxx Europe 600 fell 0.6 per cent in early buying and selling on Tuesday — however futures contracts implied Wall Road would rebound on the open.
The criticism of Powell, whose time period ends in Might 2026, comes after simultaneous falls in US shares, bonds and the greenback in latest weeks have led to worries that the volatility unleashed by Trump’s commerce conflict may grow to be a broader rejection of greenback belongings.
Analysts at MUFG stated the “triple selling of the US dollar, US bonds and US equities highlights that threats to the Fed’s independence are further undermining investor confidence in US assets”.
The greenback reversed earlier losses to commerce 0.1 per cent larger towards a basket of main currencies on Tuesday, however has fallen greater than 9 per cent this yr.
In bond markets, Treasuries traded in a slim vary, with the 10-year yield up 0.01 share factors to 4.42 per cent.
The president has ceaselessly criticised Powell for not decreasing rates of interest quickly sufficient, whereas the Fed chair has stated he would by no means be influenced by political strain.
The Fed has stored charges on maintain this yr after decreasing them thrice in a row in 2024, together with a big half-point transfer in September. The central financial institution’s subsequent assembly is in Might.
Traders and economists stated an try by Trump to take away Powell would threat inflicting harm on the US financial system.
“Any reduction in the independence of the Fed would add upside risks to an inflation outlook that is already subject to upward pressures from tariffs and somewhat elevated inflation expectations,” stated Michael Feroli, chief US economist at JPMorgan Chase.
Gold, which some buyers depend on as a hedge towards inflation, has surged 33 per cent this yr. Traders poured at the least $19bn into gold-backed alternate traded funds in the course of the first quarter, in accordance with Normal Chartered.
“Physical gold demand remains robust, particularly in Asia and increasingly in Europe,” stated Alexander Zumpfe, a bullion dealer at Heraeus. “In Germany, we observed strong buying interest from private investors even over the long Easter weekend.”
