Gold prices fell in Asian trading on Wednesday after reaching their highest level in over two weeks, following renewed concerns over the independence of the U.S. Federal Reserve, sparked by President Donald Trump’s attempts to remove one of its board members.
Gold initially rose after Trump’s late Monday announcement that he wanted to immediately dismiss Governor Lisa Cook over allegations of mortgage fraud. This announcement caused a drop in the value of the dollar, which supported gold and other metals prices.
However, the dollar was able to recover later, and U.S. Treasury yields stabilized, as both Cook and the Federal Reserve confirmed that the president did not have the legal authority to remove her from office.
Spot gold fell 0.5% to $3,378.29 per ounce, while October futures decreased by 0.1% to $3,428.70 per ounce.
The increase in gold prices this week was supported by investors seeking safe havens, amid escalating legal tensions between Trump and Cook, who confirmed her refusal to step down and announced that she would challenge the dismissal in court, stating that Trump had no legal grounds for such a decision, a stance also supported by the Federal Reserve.
This move by Trump raised widespread concerns in the markets about the potential for political interference in the Federal Reserve’s operations, which has traditionally been independent from the executive branch. Trump had earlier this year threatened to remove Federal Reserve Chairman Jerome Powell, criticizing him for not cutting interest rates further.
If Trump succeeds in replacing Cook with his own nominee, he could gain a majority on the seven member Federal Reserve Board, giving him greater influence over monetary policy decisions, especially regarding interest rate cuts, which he has repeatedly called for.
These possibilities are a source of concern for the markets, particularly as the Federal Reserve maintains a cautious stance towards further monetary easing, due to fears of inflationary effects from tariffs imposed by Trump.
Although Powell has shown some openness to a potential rate cut in September, he has not committed explicitly to such a move.
On the other hand, a rate cut would support gold and other metals prices.
The dollar recovered and continued its rise, surpassing the 98 point level, thus recovering its earlier losses this week. U.S. Treasury yields also stabilized after a sharp rise earlier, amid selling in the market.
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