On Thursday (May 29), a tense closed-door meeting took place at the White House, where President Trump and Federal Reserve Chairman Powell engaged in a heated debate over interest rate policies during a lengthy hour-long confrontation. This disagreement not only exposed the long-standing rift between the government and the central bank but also heightened tension in financial markets, with gold becoming a focal point as a safe-haven asset.
I. Policy Deadlock Escalates as Interest Rate Disputes Trigger Risk Aversion
Currently, the U.S. federal funds rate is at a high range of 4.25%-4.5%. Despite the market's general expectation that a rate cut cycle will begin in September, the Federal Reserve insists on a "data-driven" approach and steadfastly refuses to pre-commit to easing. Faced with Trump's political pressure to lower interest rates, Powell maintained his stance during the meeting, emphasizing that "the current economy does not yet meet the conditions for a rate cut," raising concerns about whether the Fed's independence can be sustained.
The Fed's meeting minutes reveal that some officials are wary of the risk of 1970s-style stagflation reappearing and fear that premature rate cuts could weaken policy credibility. Meanwhile, the Trump camp criticizes Fed policies for weakening export competitiveness, especially as China and the European Central Bank continue to lower rates, diminishing the actual effect of the "dollar weapon."
As a result, markets have turned defensive, increasing the allure of gold as a non-yielding asset. With rising policy uncertainty, investors have flocked to the gold market to mitigate potential risks.
II. Diverging Interest Rate Expectations Boost Gold
Amid the severe disagreement between Trump and Powell, the futures market reacted rapidly. CME data shows that the probability of a rate cut in September has risen to 84%, with expectations for total rate cuts for the year reaching 50 basis points. Meanwhile, U.S. core PCE data for April fell to 2.1%, approaching the Fed's target range of 2%, boosting market bets on a monetary policy shift.
Analysts suggest that if political pressure continues to intensify and economic data remains weak, gold could experience a structural upward cycle similar to that of 2008.
III. Weakening Dollar Supports Gold's Firm Technical Position
During the meeting, Trump emphasized that high interest rates "benefit big Asian nations" and criticized the strong dollar for hindering exports. Against the backdrop of ongoing pressure on Powell from the White House and a weakening dollar, gold prices have gained support.
Technically, after previously pulling back to $3,245 per ounce, gold quickly rebounded and is now holding steadily above $3,300, potentially challenging previous highs in the short term. If the Fed releases more dovish signals in future policy statements, this could further drive gold prices upward.
IV. Under Dual Geopolitical and Policy Risks, Gold Enters "Safe Haven Premium" Era
From Powell's "silent resistance" to Trump's frequent hints at "dismissal," this power struggle has gone far beyond the realm of conventional monetary policy. With the 2026 Fed reorganization approaching, the tug-of-war over central bank independence and the path of U.S. economic governance is likely to persist. As a "safe harbor" for global capital, gold is at the heart of a new cycle of attention.
Looking ahead, gold's trajectory will closely follow U.S. inflation data, Fed policy statements, and movements in the White House. Analysts generally believe that if uncertainty continues to emanate from both political and economic fronts, gold prices could break through the critical resistance level of $3,400 per ounce, ushering in a new round of medium-term uptrend.
Conclusion:
What seems like a purely technical interest rate dispute is actually a microcosm of the battle over dollar hegemony, central bank independence, and global financial stability. As tensions escalate between the Fed and the White House, gold is quietly entering its "safe haven premium" era as a barometer of policy and market strife.
