Gold prices cool after hitting over 2-week high on Fed independence fears

Investing.com-- Gold prices fell in Asian trade on Wednesday after rising to an over two-week high as U.S. President Donald Trump’s attempts to fire a Federal Reserve Governor sparked renewed concerns over the central bank’s independence.

The yellow metal had initially rallied on Trump’s late-Monday announcement that Fed Governor Lisa Cook be removed from her post immediately over allegations of mortgage fraud. The dollar tumbled after Trump’s move, also benefiting broader metal prices.

But the greenback recouped its losses, while Treasury yields also stabilized, as Cook and the Fed argued that Trump had no authority for the firing.

Spot gold fell 0.5% to $3,378.29 an ounce, while gold futures for October fell 0.1% to $3,428.70/oz by 00:23 ET (04:23 GMT).

Gold benefits from haven demand amid Trump-Fed feud

Gold’s rally this week came from traders seeking safe haven in the face of a potentially protracted legal battle between Trump and Cook.

Cook indicated that she will not step down from her position and will challenge her attempted removal in court, arguing that Trump had no cause to fire her. The Fed also echoed this notion.

But Trump’s attempts to fire Cook sparked wider concerns over political interference in the Fed, which has traditionally remained independent from the government. Trump had earlier this year also threatened to fire Chair Jerome Powell, who he has repeatedly lambasted for not cutting interest rates further.

Replacing Cook with his own nominee will give Trump a potential majority in the Fed’s seven-member rate-setting board, allowing the president to enact his calls for lower interest rates.

This notion was a major point of concern for markets, given that the Fed has maintained a largely cautious stance towards further easing, citing concerns over the inflationary impact of Trump’s tariffs.

While Powell did signal some openness to a rate cut in September, he still remained largely non-committal towards such a move.

Still, lower interest rates stand to benefit gold and other metals.

Dollar recovers, broader metal prices retreat

The dollar index rose further above 98 points on Wednesday, largely recouping losses made earlier in the week. Treasury yields also steadied after rising sharply earlier this week, amid some selling in the market.

But this pressured broader metal prices, curbing their gains this week. Spot platinum fell 0.1% to $1,353.71/oz, while spot silver fell 0.3% to $38.5035/oz.

Among industrial metals, benchmark copper futures on the London Metal Exchange fell 0.1% to $9,838.55 a ton, while COMEX copper futures fell 0.5% to $4.5248 a pound.

Both copper contracts had logged strong gains over the past week on optimism over lower U.S. interest rates and promises of more stimulus from top importer China.