Gold prices surge amid all-out confrontation between Trump and the Fed... Approaching all-time highs

After Donald Trump, the President of the United States, abruptly dismissed a Federal Reserve System (Fed) Board member, demand for gold, known as the 'king of safe-haven assets,' skyrocketed. The price of gold approached an all-time high, driven by uncertainty over monetary policy, in addition to existing expectations for a benchmark interest rate cut and this unprecedented situation since the Fed’s establishment.

On the 27th (local time), the December gold futures index on the Chicago Mercantile Exchange (CME) was trading at $3,430.7 per troy ounce as of 2:30 AM. Gold prices rose 2.48% over the past week. So far this month, the increase is 4.42%. Gold’s all-time closing high based on the futures market was $3,491.3 per troy ounce, recorded on the 8th.

On the 26th, President Trump announced via his social media, Truth Social, that he had dismissed Lisa Cook from the Fed Board. This is the first time in the Fed’s 112-year history that a president has dismissed a Board member. Previously, Bill Pulte, Director of the Federal Housing Finance Agency (FHFA), reported Lisa Cook for alleged 'mortgage fraud.' Lisa Cook is suspected of obtaining low-interest mortgage loans for residential purposes and then renting out the property.

Lisa Cook countered the dismissal, stating that "there is no legal basis for my removal" and that she would continue her duties, intensifying the confusion. The Fed also released a statement supporting Lisa Cook, stressing that "guaranteed terms and dismissal restrictions for board members are crucial safeguards for monetary policy decisions."

As President Trump effectively declared an all-out confrontation with monetary authorities by demanding rate cuts, gold—representing the prime safe-haven asset—gained further momentum. Gold continues to be spotlighted as the investment of choice, boasting overwhelming returns among major alternative assets this year. The most popular means for individual investors to invest in gold, the SPDR Gold Shares (GLD) ETF, soared 14.45% in the past year.

Having appointed three out of the current seven Fed Board members, Trump would secure a majority of four appointees if Lisa Cook's dismissal is finalized. Trump, who has been pressuring Fed Chairman Jerome Powell to lower the benchmark interest rate, would then be optimistic about a rate cut decision at the September Federal Open Market Committee (FOMC) meeting.

Typically, gold prices rise during rate cut cycles; thus, the imminent prospect of a benchmark rate cut is interpreted as a signal for a further increase in gold prices. According to the CME FedWatch Tool, the probability of a benchmark rate cut at the September FOMC, as expected by market participants, stands at 87%. Moreover, growing calls for additional rate cuts this year are expected to further fuel gold demand.

Global financial institutions are increasingly predicting a sharp rise in gold prices. Both Goldman Sachs and JPMorgan Chase have forecasted that gold will surpass $4,000 per troy ounce by the second quarter of 2026 at the latest. In an interview with Bloomberg News last month, Liam Sampson, a manager at Fidelity Investments, stated that "the Fed is gradually showing dovish tendencies," adding, "with the combined effect of benchmark interest rate cuts and a weakening dollar, gold could surpass the $4,000 mark within this year."

By Beomjin Jeon forward@hankyung.com