Gold hit a record $3,500 a troy ounce for the first time on Tuesday, as Donald Trump’s sustained attack on US Federal Reserve chair Jay Powell added to fears over the central bank’s independence and the prospects for the world’s largest economy.
In a rush to haven assets, gold climbed as much as 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 to ¥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 comes after Powell warned last week that the administration’s sweeping tariffs would lead to slower growth and higher inflation.
Trump “ratcheting up pressure on Powell to ease monetary policy is raising concerns about Fed independence, which has triggered a flight to haven assets,” said Ewa Manthey, a commodities strategist at ING.
The latest Trump salvo is deepening investors’ concern that the tension between the president and the Fed risks spilling into monetary policy and rattling the $29tn Treasuries market, the bedrock of the global financial system.
“Removing Fed independence would be another blow to the hard won credibility of America’s financial institutions,” said Trevor Greetham, head of multi-asset at Royal London Asset Management.
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 fell 0.6 per cent in early trading on Tuesday — but futures contracts implied Wall Street would rebound at the open.
The criticism of Powell, whose term ends in May 2026, comes after simultaneous falls in US stocks, bonds and the dollar in recent weeks have led to worries that the volatility unleashed by Trump’s trade war could become a broader rejection of dollar assets.
Analysts at MUFG said the “triple selling of the US dollar, US bonds and US equities highlights that threats to the Fed’s independence are further undermining investor confidence in US assets”.
The dollar reversed earlier losses to trade 0.1 per cent higher against a basket of major currencies on Tuesday, but has fallen more than 9 per cent this year.
In bond markets, Treasuries traded in a narrow range, with the 10-year yield up 0.01 percentage points to 4.42 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 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.
“Physical gold demand remains robust, particularly in Asia and increasingly in Europe,” said Alexander Zumpfe, a bullion trader at Heraeus. “In Germany, we observed strong buying interest from private investors even over the long Easter weekend.”
