Gold storms past $3,600 as Trump escalates Fed feud
Gold sealed another record high on Monday as investors doubled down on hopes of a US interest rate cut.
The yellow metal smashed highs of $3,616 on Monday – just days after it surpassed the $3,500 threshold.
The ‘safe haven’ asset benefited from a whole host of economic turmoil in recent weeks, namely President Donald Trump’s clamp down on the Federal Reserve.
“Gold keeps delivering,” said Neil Wilson, UK investor strategist at Saxo Markets.
“No doubt that the possibility of the Fed’s independence being at stake and erosion of confidence in the US and dollar is keeping momentum behind it.”
Gold boosted by weak jobs data
The White House was dealt another major blow on Friday after fresh jobs data showed the US labour market has weakened in August with just 22,000 jobs added and unemployment ticking up to 4.3 per cent.
Trump’s top team was quick to point to the blame towards the Fed for the disappointing figures.
Karoline Leavitt, White House press secretary, said Trump’s “pro-growth agenda” was being “held back by Jerome ‘Too Late’ Powell’s foolish refusal to admit that President Trump is right about everything”.
Trump’s attacks on the central bank have scaled up over the last month after his tirade of attacks launched at Powell throughout the year.
The President is hoping to remove the Fed’s governor Lisa Cook, which has spiked concerns over the central bank’s independence – a right enshrined in law.
But gold has been a big beneficiary of the turmoil, shooting up 0.5 per cent to a two-week high as Trump tried to fire Cook. The yellow metal is set for an additional boost should the ailing jobs data help push the Fed to a dovish decision on rates this month.
The metal – a none-yielding asset – typically performs well if interest rates fall, as it doesn’t have to pay interest or dividends, therefore the opportunity cost of holding it decreases compared to interest-bearing investment such as bonds or savings accounts.
The CME’s FedWatcher tool has pencilled in a near-90 per cent chance of a 25 point basis reduction on September 17.
In London, gold miners have benefited on the City market from the rise in prices.
Fresnillo was up over two per cent to 2,164.00 and FTSE 250 miner Hochschild rallied over four per cent to 339.60.