Fed Independence Threats Push Gold to New Highs

Gold prices rose 0.7% this week to $3,394 per troy ounce, once again rebounding from the $3,330–$3,350 support zone and moving toward resistance at $3,450. The main driver remains political uncertainty over the Federal Reserve’s (Fed) independence. Concerns intensified last Thursday when the U.S. Department of Justice sent a letter to Fed Chair Jerome Powell urging the removal of FOMC member Lisa Cook over alleged misconduct in mortgage lending. The letter arrived just one day before Powell’s keynote at the Jackson Hole symposium, where markets had expected a hawkish message. In anticipation, gold slipped 0.7% to $3,311. Instead, Powell surprised investors with a dovish tone, citing rising risks to the labour market and the potential need for policy adjustment. This shift pushed market-implied odds of a September rate cut above 90%. Gold responded immediately, rising 1.06% to $3,371.

The political backdrop quickly escalated. U.S. president President Donald Trump announced the dismissal of Lisa Cook. She refused to resign, calling the move unlawful, and the matter is now set for court. This creates a potential institutional challenge for Powell: if Cook attends the September 16–17 FOMC meeting without a court ruling, her presence could be grounds for questioning Powell’s leadership. Conversely, removing her himself would be seen as yielding to political pressure. Either scenario plays into Trump’s push for rate cuts, which could further unsettle markets.

Gold is highly sensitive to this dynamic. A breakdown of Fed independence would increase demand for safe-haven assets, pushing prices higher. Immediate resistance lies at $3,430–$3,450, though the longer-term trajectory remains uncertain beyond an initial breakout.

Investor flows reflect renewed confidence in gold. The SPDR Gold Trust (GLD) saw $921.3 million in outflows last week, likely ahead of Powell’s speech. This week, inflows have resumed, totaling $337.7 million, on top of earlier purchases of $1.37 billion and $744.3 million. Such positioning suggests that institutional investors are preparing for higher prices.

Macro data this week may add short-term volatility. U.S. GDP and PCE inflation readings are expected to show acceleration, contradicting Powell’s dovish tone. Yet with a September cut now widely expected, the focus is shifting from monetary policy itself to Powell’s political standing.

From a technical perspective, gold remains in a summer consolidation between $3,250 and $3,450. A downside break would be unusual given strong institutional buying. More likely, a breakout above $3,450 could open the way toward $3,500–$3,600 before any potential reversal.