Gold Touches $3,500 an Ounce for First Time

Gold Touches $3,500

 Gold Touches $3,500 an Ounce for First Time

Gold prices hit a record high of $3,500 an ounce on Tuesday, as US President Donald Trump continued his attacks on Federal Reserve Chairman Jerome Powell, raising market concerns about the central bank's independence and the prospects for the world's largest economy.

Amid widespread appetite for safe-haven assets, gold jumped as much as 2% to $3,500.10, confirming its status as one of the biggest beneficiaries of Trump's political comeback. The Japanese yen also rose to 140 yen against the dollar for the first time since September, while the dollar index fell to a three-year low.

Trump called Powell "Mr. Too Late" on his Truth Social platform on Monday, demanding that the Fed cut interest rates "now." This attack comes days after Powell warned that the administration's sweeping tariffs could slow growth and lead to higher inflation.

Eva Manthey, a commodities expert at ING Bank, said that "Trump's escalating pressure on Powell to ease monetary policy is raising concerns about the Federal Reserve's independence, prompting investors to turn to safe-haven assets," according to a report published by the Financial Times and reviewed by Al Arabiya Business.

This escalating tension has raised concerns that political conflicts could influence the central bank's policy, especially given the risk of destabilizing the $29 trillion US Treasury bond market, which forms the foundation of the global financial system. Trevor Greetham, head of multi-asset management at Royal London Asset Management, said, "Compromising the Fed's independence would be a further blow to the hard-won credibility of US financial institutions."

Stock Markets Decline

Trump's latest attack has led to a decline in market indices, with the S&P 500 falling 2.4% and the tech-heavy Nasdaq closing down 2.6%. In Europe, the Stoxx Europe 600 index fell 0.6% in Tuesday morning trading, while futures indicated a possible recovery on Wall Street at the open.

These criticisms coincide with a simultaneous decline in stocks, bonds, and the US dollar in recent weeks, raising concerns that the volatility of Trump's trade war could translate into a broader rejection of dollar-denominated assets. Analysts at MUFG Bank noted that "the triple sell-off in the US dollar, bonds, and stocks confirms that threats to the Federal Reserve's independence are undermining investor confidence in US assets."

The Dollar and Treasury Bonds

Despite a slight recovery on Tuesday, with the dollar rising 0.1% against a basket of major currencies, it is down more than 9% since the beginning of the year. In the bond market, Treasuries traded in a narrow range, with the 10-year yield rising 0.01 percentage point to 4.42%.

President Trump has often criticized Powell for not cutting interest rates quickly enough, while the Fed chairman has repeatedly emphasized that he will not allow political pressure to influence his decisions. The Fed has kept interest rates unchanged since the beginning of 2025, after cutting them three consecutive times in 2024, including a large half-percentage-point reduction in September. The Fed's next meeting is scheduled for May.

Significant Damage to the US Economy

Economists have warned that any attempt by Trump to remove Powell could cause significant damage to the US economy. "Any erosion of the Fed's independence would add upward pressure to inflation, which is already suffering from the effects of tariffs and relatively high inflation expectations," said Michael Feroli, chief economist at JP Morgan Chase.

Gold, considered a hedge against inflation, has surged 33% this year, with investors pumping more than $19 billion into gold-backed exchange-traded funds during the first quarter, according to Standard Chartered Bank.

"Demand for physical gold remains strong, especially in Asia, and is also increasing in Europe. In Germany, we saw strong interest from individual investors even during the Easter holidays," said Alexander Zumfe, a metals trader at Heraeus.