The independence of the Federal Reserve is at risk! Under the expectation of interest rate cuts, gold and silver are expected to soar together

According to the Zhitong Finance APP, U.S. President Donald Trump is attempting to remove Federal Reserve Governor Lisa Cook—this move is legally questioned, and Cook subsequently emphasized in a statement that Trump has no authority to do so and that she will not resign. Regarding Trump's latest threatening remarks, Wall Street analysts generally believe that this is less about Cook herself and more about a complete attack on the independence of the Federal Reserve's monetary policy.

If Cook were to leave, Trump could control four seats on the Federal Open Market Committee (FOMC), bringing him closer to "completely controlling the Federal Reserve's monetary policy." As the market generally expects Trump to appoint a more dovish candidate to replace Cook, the news has led to a broad weakening of the dollar, a decline in short-term U.S. Treasury yields, and a significant increase in market risk aversion and panic regarding overvalued tech giants, driving safe-haven assets like gold and silver to be eagerly sought after by market risk-averse funds, especially as current spot and futures gold prices are getting closer to setting a new historical high.

From the perspective of major Wall Street firms like Goldman Sachs, JPMorgan Chase, and Citigroup, risk aversion and panic are undoubtedly important catalysts for the short-term rise in gold prices. The outlook for U.S. economic growth momentum has turned pessimistic, and market expectations for Federal Reserve rate cuts have significantly increased. These two factors may serve as long-term bullish catalysts for gold fundamentals for a considerable time to come.

Goldman Sachs analysts stated in a recent research report that due to a seasonal slowdown in global central bank and institutional demand for gold, gold prices have been oscillating within a range for several weeks, but the prices still seem to be trending steadily. They noted that as long as gold prices do not show a sustained decline, it indicates that the demand for gold as a safe haven remains strong in the market. Goldman Sachs maintains its aggressive bullish forecast that the spot price of gold could reach $4,000 per ounce by mid-2026.

Another major Wall Street firm, JPMorgan Chase, stated that the continued threat to the Federal Reserve's independence and the deterioration of U.S. non-farm payroll data will be the strongest bullish catalysts for gold prices. In an optimistic scenario, JPMorgan Chase expects gold prices to move towards a target price of $3,675 per ounce by the end of the year, and anticipates that it could reach $4,000 per ounce as early as next year.

Independence Premium

"Regardless of the legal outcome, the signal is clear: the political pressure on the Federal Reserve from the Trump administration is rising, and over time, it may introduce a so-called 'independence premium' into U.S. assets—especially beneficial for gold, as investors tend to use physical assets to hedge against governance risks," analysts from European financial giant Saxo Bank stated in a report.

"The initial market reaction is a recalibration of cautious sentiment rather than panic: gold strengthens, the front end of the U.S. Treasury yield curve slightly declines under discussions related to the Federal Reserve's rate cuts in September, while risk assets have slightly retreated," Saxo Bank stated.

On the tactical level of asset allocation, Saxo Bank indicated that the current asset allocation strategy leans towards upward gold prices in three aspects—(1) uncertainty regarding Trump's policies, (2) if there are dovish changes among Federal Reserve FOMC members, the Fed may start the rate cut cycle earlier and the timeline for rate cuts may be longer, and (3) the demand from investors to hedge against risks related to institutional gaming "In our view, any temporary strengthening of the dollar due to inflows of safe-haven funds may indicate a consolidation of the dollar index rather than a trend reversal, provided that the Federal Reserve continues on the expected path towards lower interest rates, thereby reducing the cost of holding non-yielding assets such as gold and silver," stated Saxo Bank in its report.

Regarding the market structure of gold assets, Saxo Bank noted that the official sector dominated by global central banks remains a silent pillar of the market, while reserve managers in various countries have recently increased their allocations to gold and silver due to a tendency towards "diversified assets" and enhancing resilience against sanctions as the "American exceptionalism" narrative gradually collapses.

Attention to the upcoming U.S. interest rate cut cycle and the resulting lower opportunity costs has led to a renewed strong demand for physically-backed gold ETFs, with total holdings recently reaching a two-year high.

The upward momentum for gold and silver is expected to strengthen further

As of the time of writing, the spot price of gold has risen 0.2% to around $3,375, with a year-to-date increase of 27.5%.

Following President Trump's threat to fire Federal Reserve Governor Cook, concerns about the independence of the Federal Reserve have intensified, pushing the spot price of gold to its highest level in two weeks. Additionally, the market's expectations for a rate cut by the Federal Reserve in September continue to heat up, and Trump's statement on Monday that China must ensure the supply of rare earth magnets to the U.S. or face a 200% tariff has driven safe-haven buying into gold and the cheaper safe-haven asset—silver.

"In the past three months, gold prices have consolidated within a narrowing range around $3,350. A breakout above $3,450 could signal a resurgence of upward momentum, increasing the likelihood of breaking through $3,500 and even setting new historical highs; conversely, a drop below the $3,250 level could indicate a longer consolidation phase," Saxo Bank added.

Saxo Bank concluded that gold remains a key hedging tool against short-term global policy volatility and the slowly brewing market skepticism regarding the credibility of the Federal Reserve; silver shares this characteristic while also benefiting from additional support provided by the tight silver supply-demand fundamentals—primarily due to the growth in solar panel demand