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Gold hit a document $3,500 a troy ounce for the primary time and the greenback fell on Tuesday, as Donald Trump’s sustained assault on US Federal Reserve chair Jay Powell added to fears over the prospects for the world’s largest economic system.
In a rush to haven belongings, gold climbed 2.2 per cent to $3,500.10, cementing its place as one of many greatest winners from Trump’s return to the White Home. The Japanese yen strengthened above ¥140 per greenback for the primary time since September because the greenback index languished close to a three-year low.
In a submit on his Fact Social platform on Monday, Trump branded Powell “Mr Too Late” and urged the central financial institution to decrease borrowing prices “NOW”. The wave of criticism from Trump comes after Powell warned final week that the administration’s sweeping tariffs would result in slower progress and better inflation.
The strain between the US president and the central financial institution marks a brand new problem for traders already grappling with the fallout from the administration’s aggressive commerce coverage.
“Headlines about Trump’s strain on the Federal Reserve, questions on its independence and his potential to fireside Powell — whatever the final result — have added uncertainty to a market already flush with uncertainty,” analysts at RBC famous.
Trump’s broadside on Monday despatched the S&P 500 down 2.4 per cent and the tech-heavy Nasdaq closed 2.6 per cent decrease. The Stoxx Europe 600 fell 0.7 per cent and the FTSE 100 was little modified in early buying and selling on Tuesday.
The greenback fell 0.2 per cent in opposition to a basket of main currencies, leaving it down virtually 10 per cent this yr.
In bond markets, yields on Treasuries edged larger. The ten-year yield rose 0.02 share factors to 4.43 per cent, whereas the 30-year yield rose 0.02 share factors to 4.93 per cent.
The president has ceaselessly criticised Powell for not reducing rates of interest quickly sufficient, whereas the Fed chair has stated he would by no means be influenced by political strain.
The Fed has stored charges on maintain this yr after reducing them 3 times in a row in 2024, together with a big half-point transfer in September. The central financial institution’s subsequent assembly is in Could.
Buyers and economists stated an try by Trump to take away Powell earlier than his time period led to Could, 2026, would threat inflicting harm on the US economic system.
“Any discount within the independence of the Fed would add upside dangers to an inflation outlook that’s already topic to upward pressures from tariffs and considerably elevated inflation expectations,” stated Michael Feroli, chief US economist at JPMorgan Chase.
Gold, which some traders depend on as a hedge in opposition to inflation, has surged 33 per cent this yr. Buyers poured at the very least $19bn into gold-backed change traded funds in the course of the first quarter, in response to Normal Chartered.
“There does appear to be some flows into gold,” stated Mitul Kotecha, head of foreign exchange and rising market macro technique for Asia at Barclays, including {that a} broad array of traders had been shopping for bullion.
