Gold prices hit 2-week high as Trump-Fed dispute climbs on Cook's impeachment

Investing.com — Gold prices rose in the Asian session on Tuesday. Demand for safe havens increased as concerns about the Fed's independence grew after President Donald Trump announced he would fire Fed Governor Lisa Cook.

The fall in the dollar also benefited gold and broader metal prices. All metals have been performing fluidly in recent days as uncertainty grows over the future of US interest rates.

Spot gold rose 0.3% to $3,375.29 an ounce, while October gold futures were up 0.2% at $3,423.95 an ounce as of 03.24. Spot prices briefly reached $3,386.49 per ounce, the highest level in more than two weeks.

Trump says Fed will fire Cook, independence concerns rise

Trump said in a publicly released letter that he wants Cook's immediate dismissal, stating that he has sufficient justification for allegations of mortgage fraud against the Fed governor.

Cook denied the allegations, saying Trump had “no authority” to impeach him and would remain in office.

Cook's ouster is Trump's latest attack on the Fed, coming at a time when the president is trying to gain more influence over the Fed's rate-setting activities. Replacing Cook with his own nominee could give Trump more influence on the Fed's seven-member board, which currently includes two of his nominees: Governor Christopher Waller and Vice President for Supervision Michelle Bowman.

Waller and Bowman voted for a rate cut at the Fed's July meeting in line with Trump's demands.

Trump had previously raised the possibility of impeaching Fed President Jerome Powell. Powell had largely rejected calls to cut interest rates immediately. But Powell had made some concessions last week, raising the possibility of an interest rate cut in September due to some weakness in the labor market.

However, he remained largely undecided about further easing.

The president's repeated attacks on the Fed have raised fresh concerns about the independence of the central bank, which could damage U.S. economic credibility in the long run.

This triggered safe harbor purchases of gold and other precious metals.

Metal prices take advantage of weak dollar

Broader metal prices benefited from the weakening in the dollar following Trump's move, but the dollar index bounced back to levels above 98 points.

Spot platinum rose 0.1% to $1,346.40 an ounce, while spot silver rose 0.7% to $38.8525 an ounce. Both metals have outperformed gold in recent months. Years of underperformance led investors to look for buying opportunities in other precious metals.

Among industrial metals, indicator copper futures on the London Metal Exchange rose 0.7% to $9,848.85 per tonne, while COMEX copper futures rose 0.4% to $4,550 per pound.

Industrial metals had risen sharply last week as the Fed's hint of possible interest rate cuts boosted risk appetite. This trend had given limited gains to gold and precious metals.

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