The gold price (XAUUSD) surged close to $3,385 per ounce in early European trading on Tuesday, hitting its highest level in nearly two weeks. The rally comes amid heightened political tensions surrounding the Federal Reserve’s independence and growing expectations of a US interest rate cut in September.
The move follows news that US President Donald Trump has dismissed Fed Governor Lisa Cook, raising fears of political interference in monetary policy. At the same time, Fed Chair Jerome Powell’s dovish tone at the Jackson Hole Symposium reinforced market bets that the central bank could cut rates next month.
Fed Independence in Question
President Trump’s decision to remove Lisa Cook has shaken confidence in the central bank’s autonomy. In a letter posted on his Truth Social platform, Trump cited “sufficient cause” for the move, claiming evidence of false mortgage statements.
Markets viewed this as a direct challenge to the Fed’s independence, fueling safe-haven flows into gold as investors hedge against policy uncertainty. Analysts warn that such political pressure could lead to greater market volatility in the months ahead.
Dovish Fed Boosts Bullion
Adding to the momentum, Powell hinted that the Fed may consider a rate cut at its September meeting, though he noted that no final decision has been made. He highlighted a “challenging situation,” with inflation risks remaining but signs of a softer labor market emerging.
Dallas Fed President Lorie Logan also suggested that the Fed has room to reduce reserves, signaling ongoing adjustments in liquidity conditions.
Market pricing reflects these signals: according to CME’s FedWatch Tool, traders now assign an 84.3% probability of at least a 25-basis-point cut, a sharp jump from 61.9% just a month ago.
Technical Picture: Gold’s Path Ahead
Gold’s push above the $3,365 resistance level has opened the door to a potential test of the $3,400 psychological barrier. Analysts note that while momentum remains bullish, the yellow metal could face resistance if upcoming US economic data surprises to the upside.
Key Levels to Watch
Resistance: $3,400 and $3,425
Support: $3,365 and $3,340
A break above $3,400 could attract momentum buyers, while a dip below $3,340 may trigger short-term profit-taking.
US Data in Focus
Traders are now watching a series of high-impact economic indicators that could determine gold’s next move:
US CB Consumer Confidence (Tuesday): Strong data could bolster the dollar and weigh on gold.
Durable Goods Orders (Tuesday): Weak readings may increase fears of slowing growth, supporting gold.
Q2 GDP (Thursday): A surprise revision could alter market expectations for Fed policy.
Core PCE Price Index (Friday): The Fed’s preferred inflation gauge; hotter data could dampen rate-cut hopes.
Safe-Haven Demand Supports Gold
Beyond Fed policy expectations, safe-haven demand remains a significant driver of gold prices. Political uncertainty, fiscal concerns, and slowing global growth trends have prompted investors to seek stability in precious metals.
Jigar Trivedi, Senior Research Analyst at Reliance Securities, noted:
“Gold prices are reflecting a perfect storm of political uncertainty and dovish Fed signals. Unless the dollar stages a sharp recovery, the path of least resistance for gold remains to the upside.”
Conclusion: Can Gold Break $3,400?
The near-term outlook for gold hinges on how economic data and Fed communication evolve this week.
Bullish Scenario: Softer US data or further signs of policy easing could drive prices toward the $3,425–3,450 zone.
Bearish Scenario: Stronger growth or hotter inflation could revive dollar strength and push gold back toward $3,340 or $3,300.
