Fed Independence Under Fire Fuels Investor Anxiety
Tensions between former President Donald Trump and Federal Reserve Chair Jerome Powell have resurfaced as a key source of political risk in financial markets, casting a shadow over the U.S. dollar and creating a bullish case for gold. Trump’s aggressive rhetoric—threatening to remove Powell from his post—has drawn sharp warnings from lawmakers, market strategists, and economists, all highlighting the risk to central bank independence.
Political interference in monetary policy has historically boosted gold, which investors often treat as insurance during institutional instability. Trump’s repeated public attacks on Powell—saying “termination cannot come fast enough”—are reviving concerns about executive overreach and raising questions about the Fed’s policy credibility.
XAUUSD settled the week at $3327.38, up $89.45 or +2.76%.
Rate Policy Standoff Could Boost Gold Either Way
At the core of the feud is a widening divide over interest rates. Trump wants rapid rate cuts, claiming the Fed “owes it to the American people.” But Powell remains cautious, signaling the Fed prefers to wait for clarity on inflation risks driven by tariffs.
Gold prices tend to gain when rates are cut, as the opportunity cost of holding the metal declines. However, even if Powell resists political pressure, rising inflation concerns could still drive safe-haven flows into gold, reinforcing its appeal as an inflation hedge.
Dollar Weakness Adds Tailwind to Gold Prices Forecast
A deteriorating relationship between the White House and the Fed could undermine global confidence in U.S. financial institutions. Kathy Jones of Schwab warns that firing Powell would likely cause selloffs in both Treasurys and the dollar. Since gold is dollar-denominated, any weakening of the U.S. currency tends to increase global demand and pricing power for the metal.
Legal Risks and Market Volatility Keep Gold in Focus
Uncertainty around whether Trump can legally remove Powell adds another layer of unpredictability. Betting markets have increased the odds of Powell’s departure by year-end, and volatility concerns are mounting. Senator Warren warned such action could “crash markets,” while Evercore ISI’s Krishna Guha noted it would push markets toward stagflation risk.
Gold Prices Projection: Bullish Outlook on Political Uncertainty
The combination of political risk, interest rate uncertainty, potential dollar weakness, and legal unpredictability presents a strong bullish case for gold. As global central banks monitor U.S. policy developments, potential acceleration in gold purchases for reserve diversification could offer further price support. Unless tensions ease meaningfully, gold is likely to remain well-bid as a strategic hedge in uncertain times.
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