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Gold hit a record $3,500 a troy ounce for the first time and the dollar fell on Tuesday, as Donald Trump’s sustained attack on US Federal Reserve chair Jay Powell added to fears over the prospects for the world’s largest economy.
In a rush to haven assets, gold climbed 2.2 per cent to $3,500.10, cementing its position as one of the biggest winners from Trump’s return to the White House. The Japanese yen strengthened above ¥140 per dollar for the first time since September as the dollar index languished near a three-year low.
In a post on his Truth Social platform on Monday, Trump branded Powell “Mr Too Late” and urged the central bank to lower borrowing costs “NOW”. The wave of criticism from Trump comes after Powell warned last week that the administration’s sweeping tariffs would lead to slower growth and higher inflation.
The tension between the US president and the central bank marks a new challenge for investors already grappling with the fallout from the administration’s aggressive trade policy.
“Headlines about Trump’s pressure on the Federal Reserve, questions about its independence and his ability to fire Powell — regardless of the outcome — have added uncertainty to a market already flush with uncertainty,” analysts at RBC noted.
Trump’s broadside on Monday sent the S&P 500 down 2.4 per cent and the tech-heavy Nasdaq closed 2.6 per cent lower. The Stoxx Europe 600 was down 0.3 per cent in early trading on Tuesday.
The dollar fell 0.2 per cent against a basket of major currencies on Tuesday, leaving it down almost 10 per cent this year.
In bond markets, yields on Treasuries edged higher. The 10-year yield rose 0.02 percentage points to 4.43 per cent, while the 30-year yield rose 0.02 percentage points to 4.93 per cent.
The president has frequently criticised Powell for not lowering interest rates rapidly enough, while the Fed chair has said he would never be influenced by political pressure.
The Fed has kept rates on hold this year after lowering them three times in a row in 2024, including a large half-point move in September. The central bank’s next meeting is in May.
Investors and economists said an attempt by Trump to remove Powell before his term ended in May, 2026, would risk inflicting damage on the US economy.
“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,” said Michael Feroli, chief US economist at JPMorgan Chase.
Gold, which some investors rely on as a hedge against inflation, has surged 33 per cent this year. Investors poured at least $19bn into gold-backed exchange traded funds during the first quarter, according to Standard Chartered.
“There does seem to be some flows into gold,” said Mitul Kotecha, head of forex and emerging market macro strategy for Asia at Barclays, adding that a broad array of investors were buying bullion.
