Trump takes strong action against the Federal Reserve, gold and silver hit new highs in response

The political storm surrounding the independence of the Federal Reserve has added fuel to this year's bull market in precious metals.

On Monday, September 1st, under the combined effects of a weakening dollar and expectations of interest rate cuts, the auction price of gold soared. According to data from the London Bullion Market Association (LBMA), the afternoon gold auction price was finally confirmed at $3,475 per troy ounce, surpassing the previous high of $3,454 set on April 22, and setting a new historical record.

In the spot market, gold briefly touched a four-month high of $3,489, just $11 shy of the historical peak. Meanwhile, silver prices also surged to a fourteen-year high of $40.76 per ounce. Today, the upward momentum of gold and silver continues.

Analysts point out that the latest round of increases in the precious metals market is closely related to Trump's pressure on Federal Reserve Chairman Jerome Powell and the firing of Governor Lisa Cook. According to the Financial Times, since Trump announced the dismissal of Cook, who is currently contesting this action in court, gold prices have risen for several consecutive days.

This series of events has intensified market expectations that the Federal Reserve will cut interest rates at its policy meeting on September 17. As a non-yielding asset, gold typically performs better in a declining interest rate environment, and concerns about the stability of U.S. institutions further amplify its appeal as a safe-haven asset.

Political Storm Ignites Safe-Haven Demand

Concerns about the independence of the Federal Reserve have become a new catalyst for rising gold prices.

BMO commodity analyst Helen Amos stated, "The market is worried not only about the Federal Reserve but also about the overall institutional strength of the United States. From the perspective of safe-haven demand, this is naturally favorable for gold."

The Trump administration's actions against the Federal Reserve have been interpreted by the market as a direct intervention in the independence of monetary policy. In the week following Trump's announcement of Cook's dismissal, gold prices have risen daily, indicating that investors are buying gold to hedge against political uncertainty risks.

Rate Cut Expectations Fuel the Uptrend

In addition to political factors, clear expectations for monetary policy have also injected a strong boost into the precious metals market. Recent remarks by Federal Reserve Chairman Powell at Jackson Hole, along with last Friday's expected U.S. Personal Consumption Expenditures (PCE) report, have further solidified the market's view that the Federal Reserve is about to cut interest rates.

A decrease in interest rates reduces the opportunity cost of holding non-yielding assets like gold, thereby enhancing their attractiveness. Additionally, the weakening dollar on Monday made gold, priced in dollars, more advantageous for investors holding other currencies.

However, analysts point out that since Monday was the U.S. Labor Day holiday, market trading volume was relatively light, which may have exacerbated price volatility

The Bull Market for Precious Metals Continues

Monday's record-breaking market performance is not an isolated event, but rather built on months of strong gains in precious metals. In fact, driven by multiple factors, gold prices have risen over 30% this year, while COMEX silver has seen an increase of over 40%.

These driving factors include concerns about the role of the US dollar in the global financial system, prompting multiple central banks to increase gold purchases for reserve diversification.

Additionally, ongoing geopolitical uncertainty, fears of rising inflation, and worries about the health of the US economy have collectively supported this historic bull market for precious metals.

Looking ahead, trade friction remains a focal point for the market. Analysts at Peel Hunt wrote in a client report that the market seems to be preparing for a potentially weak US employment report this week, while rumors suggest that silver may become the target of Trump's next round of tariffs, which also provides additional support for silver prices.

Currently, gold and silver have not yet been included in the US tariff list. Although US Customs unexpectedly announced tariffs on gold bars last month, the policy was revoked a few days later, highlighting the uncertainty of the policy. In a complex macro environment, the outlook for the precious metals market remains closely tied to political and economic dynamics