Peter Smith
Gold prices reached a new all-time high near $3,425 as tensions between President Trump and Federal Reserve Chairman Jerome Powell intensified, putting pressure on the US dollar and boosting the precious metal's appeal.
Gold (XAU) Soars to Record High Amid Fed Independence Concerns
Gold price (XAU/USD) traded at a new all-time high near $3,425 during North American trading hours on Monday. The precious metal strengthened significantly as the US Dollar faced heavy selling pressure, with concerns mounting about the Federal Reserve's independence after United States President Donald Trump suggested he might remove Fed Chairman Jerome Powell from his position.
The US Dollar Index (DXY), which measures the Greenback's performance against six major currencies, plummeted to near 98.00, marking its lowest level in three years. From a technical perspective, a weakening US Dollar traditionally makes Gold more attractive to investors holding other currencies.
President Trump's criticism of Powell centered on interest rate policy, despite falling prices in certain goods and commodities, particularly oil. "The Fed really owes it to the American people to get interest rates down. That's the only thing he's good for," Trump stated, adding, "I am not happy with him. If I want him out of there, he'll be out real fast, believe me," in comments made on Friday.
XAU (GOLD) Benefits from White House Pressure on Federal Reserve
Further intensifying market concerns, White House economic adviser Kevin Hassett confirmed that the President and his team are exploring ways to remove Powell from his position. "The President and his team will continue to study that matter," Hassett revealed on Friday.
During Monday's North American trading session, Trump renewed his criticism of Powell for not adopting a more accommodative monetary policy approach. "There can be a SLOWING of the economy unless Mr. Too Late, a major loser, lowers interest rates, NOW," Trump posted on Truth Social. The President also suggested that inflation was already declining, stating, "Preemptive cuts in interest rates are being called for by many. With energy costs way down, food prices (including Biden's egg disaster!) substantially lower, and most other 'things' trending down, there is virtually no inflation."
Financial market participants have interpreted these comments as significantly negative for the US Dollar's prospects, as they raise serious questions about the Federal Reserve's independence from political influence. This has led investors to further downgrade the dollar's safe-haven status. Analysts at Scotiabank noted that "Political interference in Fed policy making would erode confidence in the USD and may bolster inflation in the longer run."
Recent shifting headlines from Washington regarding tariff policies have also forced investors to reconsider the US Dollar's position as a global "reserve currency." Market experts believe that Donald Trump's implementation of more severe than expected tariffs could potentially harm the US economy itself. From a theoretical standpoint, increasing economic concerns in the United States typically enhance the safe-haven appeal of precious metals like Gold.
Gold (XAU) Rally Could Face Headwinds as Trade Tensions Ease
While Gold prices continue their strong performance due to heightened trade tensions and dollar weakness, the safe-haven demand for the precious metal might soon diminish as trade negotiations between the US and its trading partners show signs of progress.
President Trump has expressed optimism about reaching trade agreements with Japan and Mexico following meetings with their representatives last week. "Had a very productive call with the President of Mexico yesterday. Likewise, I met with the highest-level Japanese Trade Representatives. It was a very productive meeting. Every Nation, including China, wants to meet! Today, Italy!" Trump wrote in a post on the TruthSocial platform on Thursday.
Over the long weekend, due to Good Friday, Trump stated, "There will be a trade deal, 100%," adding that "but it will be a fair deal." These comments followed his meeting with Italy's Prime Minister Giorgia Meloni, who became the first European Union leader to meet with Trump after the announcement of reciprocal tariffs.
Trump has also expressed confidence regarding a potential deal with China, noting, "We're having nice conversations going with China. It's really very good," on Friday. Additionally, US Commerce Secretary Howard Lutnick shared optimism about a US-China trade agreement, saying during the weekend, "We're confident it will work out with China."
Market participants anticipate that successful trade agreements between the US and its trading partners, particularly China, could lead to the reversal of reciprocal tariffs announced by Trump. Such a scenario would likely reduce global economic uncertainty and potentially decrease the safe-haven demand for precious metals.
XAU (GOLD) Technical Analysis Shows Strong Bullish Momentum
From a technical analysis perspective, the Gold price surpassed the $3,400 level on Monday, continuing its strong upward trajectory that began over a week ago following an upside breakout from a one-year-old Rising Channel pattern on the daily chart. The upper boundary of this chart pattern is drawn from the April 12, 2024, high of $2,431, while the lower boundary extends from the February 15, 2024, low of $1,990.30.
All short-to-long Exponential Moving Averages (EMAs) are trending higher, indicating a robust uptrend in the precious metal's price action.
The 14-day Relative Strength Index (RSI) has jumped to near 75.00, signaling strong bullish momentum, although this reading also suggests the metal has entered overbought territory.
Looking at potential support levels, the April 11 high of $3,245 is expected to serve as a key support zone for Gold. On the upside, once Gold stabilizes above the $3,400 level, the round-level resistance of $3,500 will likely emerge as the next significant hurdle for the precious metal.
Peter Smith
