Gold Soars to Four-Month High — Fed Independence Under Threat, Global Risk-Off Sentiment Surges

TradingKey - As of this report, gold prices are surging, with spot gold briefly touching $3,489 per ounce — the highest level since April 23. Silver has also broken through the $40 per ounce mark for the first time in over a decade. This rally is being driven by a dual shock: mounting threats to the independence of U.S. monetary policy and continued weakness in the labor market.

Gold intraday chart, source: TradingKey

Market bets on a September Fed rate cut have surged, becoming a core driver of gold’s appeal. Mary Daly, President of the San Francisco Federal Reserve, reinforced this expectation with dovish remarks, reiterating that the labor market faces downside risks and that the Fed should start cutting rates now.

Market-implied probability of Fed rate cuts, source: cmegroup.com

Federal Reserve Governor Christopher Waller has also publicly supported a July rate cut, stating that private-sector job growth has “nearly stalled” and that policy should not wait for the economy to deteriorate further.

Top institutions, including Goldman Sachs and BCA Research, have warned that the U.S. labor market is on the brink of a “stall speed.” Once unemployment begins to rise in a self-reinforcing cycle, the economy could face significantly greater pressure.

Against this backdrop, President Trump’s direct attacks on the Fed’s independence have intensified market fears over policy uncertainty.

Trump has repeatedly criticized Chair Jerome Powell and, citing allegations of “mortgage fraud,” announced the removal of Fed Governor Lisa Cook — a move now facing legal challenges.

On Monday, European Central Bank President Christine Lagarde issued a stark warning, stating that if Trump succeeds in politicizing the Federal Reserve, it would pose a “serious threat” to both the U.S. and global economies, undermining the very foundation of U.S. economic stability.

This erosion of central bank independence strikes at the heart of dollar credibility.

Matt Simpson, analyst at City Index, noted that a U.S. appeals court recently ruled that parts of Trump’s tariff policies were “illegal” — a decision that has already pressured the dollar. Now, political interference in monetary policy is pushing investors toward gold as a hedge against institutional risk.

As a non-yielding asset, gold typically performs strongly when interest rates fall and confidence in fiat systems wavers.

Today, weak economic data and growing political pressure on the central bank point toward the start of a new easing cycle. This not only reduces the opportunity cost of holding gold but also strengthens its role as a safe-haven asset in times of systemic uncertainty.