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Gold prices reached a record high of $3,500 per troy ounce for the first time, while the US dollar declined, influenced by former President Donald Trump’s continued critique of US Federal Reserve Chair Jay Powell. This situation has amplified concerns about the economic outlook for the United States.
Gold prices rose by 2.2%, and the Japanese yen appreciated to over ¥140 per dollar, a level not seen since September, as investors sought refuge in safer assets. Trump’s comments on his Truth Social platform labeled Powell as “Mr Too Late” and called for the central bank to reduce interest rates immediately. This criticism followed a warning from Powell, who indicated that the administration’s extensive tariffs could slow economic growth and raise inflation.
The tension between the US executive branch and the Federal Reserve poses a new challenge for investors, who are already dealing with the repercussions of the administration’s aggressive trade policies. RBC analysts noted that the situation surrounding Trump’s pressure on the Federal Reserve, questions about its autonomy, and his potential ability to dismiss Powell have created additional uncertainty in an already volatile market.
Trump’s critique led to a 2.4% drop in the S&P 500 and a 2.6% decrease in the Nasdaq on Monday. The futures for the Stoxx Europe 600 also dipped by 0.3% on Tuesday. The dollar’s value fell by 0.2% against a basket of major currencies, marking a nearly 10% decline for the year.
In the bond market, Treasury yields experienced a slight increase. The 10-year yield rose by 0.02 percentage points to 4.43%, with the 30-year yield also climbing by 0.02 percentage points to 4.93%.
Trump regularly criticized Powell for not reducing interest rates quickly enough, though Powell has stated his decisions would not be swayed by political pressure. Investors and economists warn that an attempt by Trump to remove Powell before his term ends in May 2026 could harm the US economy. Michael Feroli, Chief US Economist at JPMorgan Chase, noted that any reduction in the Fed’s independence would increase inflation risks, already pressured by tariffs and heightened inflation expectations.
Gold has significantly benefited from Trump’s return to the political scene, with its price climbing 33% this year. Mitul Kotecha, Head of Forex and Emerging Market Macro Strategy for Asia at Barclays, observed that a diverse group of investors is turning to gold as a protective asset against inflation.
