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Gold reached a historic high of $3,500 a troy ounce on Tuesday, driven by concerns surrounding the independence of the US Federal Reserve due to Donald Trump’s ongoing criticism of Fed Chair Jay Powell. The surge in gold prices, climbing as much as 2 per cent to $3,500.10, reflects the growing uncertainty around the central bank’s autonomy and the economic outlook.
Trump’s recent attacks on Powell via his Truth Social platform have intensified worries about Fed independence, leading to a flight to safe-haven assets. This has resulted in the Japanese yen strengthening to ¥140 per dollar for the first time in months, while the dollar index remains near a three-year low.
The escalating tensions between Trump and the Fed have triggered concerns among investors that the conflict could impact monetary policy and disrupt the global financial system, particularly the $29tn Treasuries market.
Analysts are warning that any threats to the Fed’s independence could further undermine investor confidence in US assets, as seen in the recent sell-off of the US dollar, bonds, and equities. The potential repercussions of Trump’s pressure on Powell are significant, with fears of increased inflation and economic instability looming.
Despite the criticism from Trump, Powell has maintained the Fed’s stance on interest rates, with the central bank keeping rates unchanged this year. The Fed’s next meeting is scheduled for May, where further decisions on monetary policy will be made.
Gold, traditionally viewed as a safe-haven asset, has experienced a significant rally this year, up 33 per cent. Investors have poured billions into gold-backed exchange traded funds, seeking protection against inflation and economic uncertainty.