Gold Jumps to $3,400: Trump-Powell Feud Fuels Fed Independence Anxiety
- Gold Price Soars to New Record as Trump Lambastes Powell, Calling Rate Cut Delays a “Major Loss”.
- Dollar Index (DXY) Drops Sharply to 97.92 Amid Fed Independence Concerns and Persistent Stagflation Worries.
- Market Watchers Prepare for Key Fed Speeches from Jefferson, Harker, and Kashkari This Week as Policy Path Remains Uncertain.
Gold is kicking off the week with a strong surge, climbing over 2.56% and notching another all-time high. The price of the precious metal touched $3,430 earlier today as concerns bubble up about potential threats to the Federal Reserve’s (Fed) independence. Currently, XAU/USD is trading around $3,419, having bounced back from a daily low of $3,329.
The demand for gold is picking up steam as US President Donald Trump continues to apply pressure on the Fed. Trump didn’t hold back, labeling Fed Chair Jerome Powell a “major loser” and criticizing him for consistently being “too late” to lower interest rates.
Just last week, Powell indicated that the US central bank is taking a “wait-and-see” approach and even raised the possibility of a stagflation scenario. He acknowledged the tricky situation, stating, “We may find ourselves in a challenging situation where our goals of stable prices and full employment are pulling in opposite directions.”
These rising tensions between Trump and Powell, coupled with ongoing worries about trade policy, have been weighing on the US dollar. As a result, the US Dollar Index (DXY) has slid to a three-year low, reaching 97.92.
Looking at the economic calendar, the US economic docket is quiet today, but attention will quickly shift to the Fed’s perspective with a series of speeches scheduled. Investors are particularly keen to hear from Fed Vice-Chair Philip Jefferson, Philadelphia Fed President Patrick Harker, and Minneapolis Fed President Neel Kashkari, all of whom are slated to speak on Tuesday.
Daily Market Digest: Gold Price Rockets to Record Levels Despite High US Treasury Yields
- The US 10-year Treasury yield has edged up by four basis points to 4.373%, yet surprisingly, this hasn’t dampened the enthusiasm for gold.
- Real yields in the US are also on the rise, climbing by three and a half basis points to 2.14%, as indicated by the US 10-year Treasury Inflation-Protected Securities yield.
- In the rates market, money market participants are now anticipating around 94.5 basis points of rate cuts from the Fed by the close of 2025, with the first rate reduction largely expected as early as July.
- This week’s US economic calendar is packed, with a barrage of Fed speakers, the S&P Global Flash PMIs, Durable Goods Orders data, and the final reading of the University of Michigan Consumer Sentiment index all on deck.
XAU/USD Technical Analysis: Gold Price Looks Ready to Test $3,450 in the Short Term
The upward trend for gold prices is still firmly in place, with analysts at Citi even suggesting a potential move towards $3,500 within the next three months. While the Relative Strength Index (RSI) is now signaling overbought conditions, hinting at a possible short-term dip, the recent break above previous highs indicates that buyers might have enough momentum to push towards $3,450 soon.
On the flip side, should XAU/USD fall below the $3,400 mark, the initial support level to watch would be the April 17 high around $3,357, followed by the psychological level of $3,300.
Gold FAQs
Gold boasts a rich history as a vital asset, long recognized as a reliable store of value and a medium for trade. Beyond its beauty and use in jewelry today, gold is widely considered a safe-haven asset, meaning it’s seen as a smart investment when times get uncertain. Gold is also popular as a hedge against inflation and currency depreciation because its value isn’t tied to any single issuer or government.
Central banks are the biggest holders of gold worldwide. To bolster their currencies during economic turbulence, central banks often diversify their reserves by buying gold. This is done to strengthen the perceived health of their economy and currency. Large gold reserves can inspire confidence in a country’s financial stability. According to the World Gold Council, central banks added a massive 1,136 tonnes of gold to their reserves in 2022, worth roughly $70 billion. This represents the largest annual gold purchase since record-keeping began. Central banks in emerging economies like China, India, and Turkey are rapidly increasing their gold holdings.
Gold generally moves in the opposite direction to the US Dollar and US Treasuries, both of which are also major reserve and safe-haven assets. When the Dollar loses value, gold tends to gain, offering investors and central banks a way to diversify their holdings during volatile periods. Gold also typically has an inverse relationship with riskier assets. A booming stock market usually puts downward pressure on gold prices, while market downturns tend to make the precious metal more attractive.
A wide range of factors can influence gold prices. Geopolitical instability or fears of serious recession can quickly drive up gold prices thanks to its safe-haven appeal. As an asset that doesn’t generate yield, gold tends to become more attractive when interest rates are lower, while higher interest rates typically weigh on its price. However, many price movements hinge on the behavior of the US Dollar (USD), as gold is priced in dollars (XAU/USD). A strong Dollar often keeps gold prices in check, whereas a weaker Dollar is likely to push them higher.
