Gold prices were lower this Wednesday morning amid a rising dollar, but concerns about the independence of the US central bank after Donald Trump's threat to fire one of its governors capped losses.
At the time of writing, gold futures were down 0.2% to $3,426.00 per ounce, while spot gold slipped 0.1% to $3,375.29 per ounce.
The US dollar index (DX-Y.NYB), which measures the greenback against a basket of six currencies, was higher 0.2% to 98.44. A stronger greenback makes gold less attractive for other currency holders.
“Short-term speculators are now taking a small profit. Nevertheless, gold continues to be supported, especially as we begin to see a much clearer ‘dovish' stance from the Federal Reserve,” said OANDA senior market analyst Kelvin Wong.
“In the near term, we may see a potential increase in price pressure aimed at testing the $3400 level, above which will be $3435,” he added.
Read more: FTSE 100 LIVE: Stock mixed as UK energy prices set to rise more than expected
According to the CME FedWatch Tool, markets are pricing in an 87% probability of a quarter-point rate cut at the Fed's policy meeting on 17 September. Non-yielding gold typically performs well in a low-interest-rate environment.
Trump said he was firing Federal Reserve Board member Lisa Cook over alleged violations in obtaining mortgage loans, which could test presidential authority over the US Federal Reserve. In response, Cook said Trump had no authority to fire her from the central bank, and she would not resign.
Trump has been pushing the US central bank to cut rates and has repeatedly criticised Fed chairman Jerome Powell for acting too slowly.
Rabobank said: “The unabashed politicisation of the supposedly independent and technocratic process of setting the price of money once again confirms that it is no longer the 1990s and that old ideas about optimal policy transmission, central bank credibility and the need to insulate important decisions from the influence of the popular will offers little protection against the new paradigm of raw power politics.”
Oil prices continued their sharp decline on Wednesday morning as markets weighed the potential fallout of the United States imposing 50% tariffs on Indian imports.
Brent (BZ=F) crude futures lost 0.2% to trade at $66.12 per barrel at the time of writing, while West Texas Intermediate (CL=F) futures fell by 0.4% to $63.01 a barrel.
The US increased tariffs on select Indian goods to 50% on Wednesday, marking the highest tariff rate imposed on any Asian nation. The action is a direct response to India's ongoing imports of Russian oil, despite Western sanctions targeting Moscow’s energy exports.
