Gold pops above $ 3,700: FED decision puts markets sharply

Gold broke through on Monday afternoon to a record high of $ 3,685 per ounce. But today the precious metal is adding a little extra and even briefly exceeded the level of $ 3,700. With this gold continues its strong rally. The rally came at the same time as new records on the stock markets. The price of Bitcoin (BTC) in the meantime remains stable above the level of $ 115,000.

Gold explodes to record high

The market expectation is driven by the upcoming interest rate meeting of the Federal Reserve. Last week, a higher than expected consumer price index (CPI) initially led to worries, but a record increase in the number of unemployment benefits caused renewed optimism in the markets. Investors almost certainly consider that the Fed tomorrow reduces interest rates with 25 basic points.

Raw material traders already anticipated this scenario, so that gold broke the $ 3,700 limit per ounce for the first time. The American Bank Goldman Sachs warned that the price of gold can rise even further when the independence of the Fed is at stake.

According to the bank, that scenario would lead to “higher inflation, lower stock and bond prices and an attack on the status of the dollar as a reserve currency.” On the other hand, gold is “a value storage that is not dependent on institutional trust.”

Political pressure on Federal Reserve

The situation around the FED is further complicated by political tensions. President Donald Trump has been doing busy for months on chairman Jerome Powell, who hesitated with interest rates because of the stubborn inflation. In the meantime, a FED gouverneur unexpectedly resigned and was replaced by a Trump all-fellow.

Another board member, Lisa Cook, was fired by the president due to alleged mortgage fraud. However, the judge put a stop to this last week and Cook will still participate in the meeting this week. Critics see Donald Trump’s actions as an attempt to fill the seven-member FED council with loyalists, which could undermine the independence of the central bank.

“Care about the independence of the central bank should be very important when inflation is high,” said Vincent Reinhart, chief economist at the Bank of New York, in conversation with Politico. “That independence gives them the opportunity to do something difficult.”

While gold is in the spotlight, silver also performs strongly. The price of silver has risen to a height of almost 43 dollars per ounce. This is an increase of more than 4 percent in the last seven days.