I believe in rules. Sure, I do. If there weren't any rules, how could you break them? That’s probably how the U.S. President sees the world. Judging by his recent remarks, one can say that Trump is following his own rulebook. If you haven’t been keeping up with the news, here’s a quick rundown.
The U.S. Federal Reserve chair, Jerome Powell, is currently under fire from Donald Trump, who is now threatening to fire the head of the central bank. Powell has been in the role since 2018, and while his term isn’t set to end until May 2026, multiple reports suggest that Trump is considering removing him before then. But does he actually have the authority to do that?
Such a move would be unprecedented. Historically, the president has respected the independence of the central bank, even if there is a disagreement over monetary policy.
So why is Trump criticizing the Fed? Since returning to the office, Trump has watched the Fed hold two policy meetings — one in January and another in March — where officials chose not to change interest rates, citing economic uncertainty.
After Trump rolled out his latest round of tariffs, he expected the Fed to cut interest rates. However, Powell indicated that the central bank believes those tariffs will likely push prices higher, which makes a rate cut far less probable.
The Fed plays a major role in the U.S. economy and must tread carefully with each decision. Its policies can affect the stock market, the value of the US dollar and government bonds — all of which have broader economic consequences. With the next board meeting scheduled for 6 and 7 May, Trump appears to be trying to pressure the Fed ahead of time. Still, it is unlikely the officials will cave.
Although Trump now doesn’t have the legal authority to fire the Fed chair, the possibility has rattled markets.
Gold prices surged another 2% early Monday, pushing this month’s gains to a remarkable 9%. And that marks the fourth consecutive month of growth for the precious metal. Gold spiked to $3,400 per ounce this morning, hitting a record high of $3,397 during the session.
So why is gold on the rise? Gold is often seen as a safe haven during times of uncertainty or geopolitical tension. If Powell is ousted, his successor may be more inclined to reduce interest rates. Trump is reportedly considering appointing Kevin Warsh as Powell’s replacement, though Warsh is thought to be even more hawkish than Powell.
Even the possibility of such a change has hit the greenback hard, with the U.S. dollar index falling to a three-year low below 98.
Prospects of lower interest rates tend to weaken the national currency, as lower rates reduce the yield investors can earn on deposits. Traditionally, when the U.S. dollar drops, gold prices climb.
This article was written in cooperation with TradingView