The independence of the Federal Reserve is in jeopardy! Gold and silver are expected to join forces to boom in anticipation of interest rate cuts

The Zhitong Finance App learned that US President Trump is trying to remove Federal Reserve Governor Lisa Cook — this move was questioned by law, and Cook later emphasized in a statement that Trump had no right to do this, and that she would not resign. Regarding Trump's latest threatening remarks, Wall Street analysts generally believe that this is not so much about Cook himself as about the Federal Reserve's monetary policy independence.

If Cook leaves office, Trump may control four Federal Reserve FOMC monetary policy committee seats, one step closer to “completely controlling the Fed's monetary policy.” Since the market generally expects Trump to appoint a more dovish candidate to replace Cook, after the news broke, the US dollar weakened across the board, and short-term US bond yields fell. Under threat to the independence of the Federal Reserve, risk aversion in the market and fear of overvalued tech giants heated up sharply, driving the safe-haven asset gold and silver to be eagerly sought by safe-haven funds in the market. In particular, it can be said that the current gold spot and futures prices are getting closer to record highs.

According to major Wall Street banks such as Goldman Sachs, J.P. Morgan Chase, and Citi, risk aversion and panic are undoubtedly important catalysts to help gold prices rise in the short term, while the outlook for US economic growth momentum is turning pessimistic and market expectations for interest rate cuts from the Federal Reserve are heating up sharply. These two major logics may become long-term bullish catalysts for gold fundamentals for a long time to come.

Goldman Sachs analysts said in a recent research report that due to the seasonal slowdown in gold demand from central banks and institutions around the world, the price of gold has been fluctuating within the range for several weeks, but the price still seems to be steady. They also said that as long as the price of gold does not continue to fall, it indicates that the safe-haven buying power of gold is still strong in the market. Goldman Sachs maintains the agency's aggressive bullish expectations that the spot price of gold is expected to reach $4,000 per ounce in mid-2026.

Another major Wall Street bank, J.P. Morgan Chase, said that the continued threat to the independence of the Federal Reserve and the deterioration of US non-farm payrolls data will be the strongest bullish catalyst for gold prices. Under optimistic circumstances, J.P. Morgan expects the price of gold to move towards the target price of 3,675 US dollars/ounce by the end of the year, and is expected to reach 4,000 US dollars/ounce as soon as early as next year.

Independent premium

“Regardless of the legal outcome, the signal is clear: the Federal Reserve is facing rising political pressure from the Trump administration, and over time, it may introduce a so-called “independence premium” into US assets — particularly beneficial to gold, as investors tend to use physical assets to hedge against government governance risks.” Analysts from European financial giant Saxo Bank said in a report.

“The initial market reaction was a recalibration of cautious sentiment rather than panic: gold strengthened, front-end yields on the US debt curve declined slightly following discussions related to the Fed's September interest rate cut, while risk assets declined slightly.” Saxo Bank said.

At the tactical level of asset allocation, Saxo Bank said that the current asset allocation strategy is biased against the rise in gold prices in three aspects — (1) Trump's policy uncertainty, (2) if the FOMC members of the Federal Reserve change, the Fed may start the interest rate cut cycle earlier and the interest rate cut timeline may be longer, and (3) investors' needs to hedge against risks related to institutional gaming.

“In our view, any brief strengthening of the US dollar due to the inflow of safe-haven funds may mean a consolidation of the US dollar index rather than a trend reversal, provided that the Federal Reserve maintains the expected path towards lower interest rates, thereby reducing the cost of holding unprofitable assets such as gold and silver.” Saxo Bank said in the report.

At the level of the market structure of gold assets, Saxo Bank said that official sector purchases led by central banks around the world are still the silent backbone of the market, and reserve managers in various countries have recently increased the allocation of gold and silver due to the gradual collapse of the “American exception theory” and to increase resilience in relation to sanctions.

Increased attention to the upcoming US interest rate cut cycle and the resulting lower opportunity costs has triggered another strong market demand for physical gold-backed ETFs, and total holdings recently hit a two-year high.

The upward momentum of gold and silver is expected to grow stronger

At press time, the spot price of gold rose 0.2% to around $3,375, and the year-to-date increase extended to 27.5%.

After US President Trump threatened to fire Federal Reserve Governor Cook, market concerns about the independence of the Federal Reserve intensified, and the spot price of gold reached the highest level in two weeks. Furthermore, market expectations for the Federal Reserve's interest rate cut in September continue to heat up, and Trump's statement on Monday that China must ensure America's supply of rare earth magnets, otherwise it will face 200% tariffs, all driving safe-haven purchases in the market to rush to gold and a cheaper safe-haven asset — silver.

“Over the past three months, the price of gold has consolidated within a narrow range around $3,350. If it breaks through $3,450, it may indicate a resurgence of upward action, and the possibility of breaking through the $3,500 mark or even reaching a new record high will increase; falling below the $3,250 mark may point to a longer consolidation phase.” Saxo Bank added.

Saxo Bank concluded that gold remains a key safe-haven tool to hedge against short-term global policy fluctuations and slowly fermenting market questions about the Fed's credibility; silver undertakes this attribute while benefiting from additional support provided by tight silver supply and demand fundamentals — mainly due to increased demand for solar cells.