Global gold prices hit their highest level in two weeks, sending shockwaves through markets and investors scrambling. Find out what’s driving the surge!
The demand for safe havens as investors’ confidence in the Fed wavered after Mr. Trump fired the Fed Governor caused gold prices to increase by nearly $30 an ounce.
At the end of the trading session on August 26, the world spot gold price increased by $27 to $3,392 an ounce. This is the highest level since the session on August 11. In the morning session, the price is still fluctuating around this level.
The market rose on safe-haven demand for gold. Investor confidence in the ability of the US Federal Reserve (Fed) to operate independently was shaken after US President Donald Trump announced the dismissal of Fed Board of Governors member Lisa Cook over allegations of mortgage fraud.
“This news is good for gold, because the Fed is still the main driver of the market,” said Bob Haberkorn, market strategist at RJO Futures.
This is an unprecedented move, considered a test of the limits of the power of a US President with an agency known for its ability to operate independently like the Fed. Ms. Cook later affirmed that Mr. Trump “has no legal basis and authority” to remove her.
Last week, Fed Chairman Jerome Powell signaled that he could cut the reference interest rate at next month’s meeting. He said risks to the labor market were increasing. CME’s FedWatch tool shows that investors now see a nearly 90% chance of a September rate cut
“If this forecast comes true, and the Fed announces another cut this year, gold prices will continue to rise,” Haberkorn stressed. Gold prices tend to rise during periods of low interest rates or economic and social turmoil.
Investors are now waiting for US GDP data, due on August 28. A day later, the personal consumption expenditures (PCE) index – the Fed’s preferred inflation measure – will also be released.
In addition to gold, silver and palladium also rose on August 26, to $38.50 and $1,102 an ounce, respectively. Platinum, on the other hand, fell slightly to $1,340.