On Wednesday, July 16, reports emerged that US President Trump was planning to dismiss Federal Reserve Chairman Jerome Powell. This news led to a sharp increase in gold prices, surging by 1.6% at one point. However, as Trump denied the dismissal of Powell, the gold price increase moderated. The US stock market rebounded, with the Dow Jones Industrial Average closing up 0.5% and the S&P 500 index gaining 0.3%.
The turnaround in the market on Wednesday showed the unusual attention the financial market has towards this issue.
Spot gold rose by 1% to $3,355.40 per ounce on Wednesday, having earlier surged by 1.6%. US gold futures closed up by 0.7% at $3,359.10 per ounce.
According to Reuters, Trump stated that he has no intention of firing Powell but did not completely rule out the possibility. The reason given was an ongoing investigation into whether the Federal Reserve’s $25 billion renovation project was over budget.
Daniel Ghali, a commodity strategist at TD Securities, stated, “The news of Trump’s possible dismissal of Powell pushed up the price of gold…but he later clarified that the possibility is very low. The market reacted strongly to these conflicting messages.”
Additionally, escalating geopolitical tensions in the Middle East also drove safe-haven buying. Israel launched intense airstrikes on Damascus, hitting the Syrian Defense Ministry and the area near the presidential palace. This heightened global uncertainty further supported the rise in gold prices.
On the trade front, the European Commission is preparing to impose tariffs on up to $841 billion worth of US goods as retaliatory measures in response to the breakdown in negotiations. This is in response to Trump’s threat last week to impose a 30% tariff on European imports.
Jim Wyckoff, senior analyst at Kitco Metals, a global authority on precious metals and retailer of gold bullion products, stated, “Israel’s military action, along with the US taking a tougher stance on trade, has made the market more uncertain, helping to push gold prices higher.” He expects gold to fluctuate between $3,250 and $3,476 per ounce in the short term.
Supporting the gold price is also an economic data point: the US June Producer Price Index (PPI) unexpectedly remained flat, not rising as it did in May by 0.3%. This data, along with the June Consumer Price Index (CPI) rising by 0.3% (higher than May’s 0.1%) released on Tuesday, collectively indicate that the Fed may be more cautious about future rate cuts.
In other precious metals on Wednesday, spot silver rose by 0.5% to $37.89 per ounce; platinum surged by nearly 3% to $1,412.55 per ounce; and palladium rose by 1.8% to $1,227.73 per ounce.
On the same day, all three major US stock markets saw gains, with the Dow Jones Industrial Average rising by 231.49 points, or 0.53%, to 44,254.78 points; the S&P 500 index gaining 19.94 points, or 0.32%, to 6,263.70 points; and the Nasdaq increasing by 52.69 points, or 0.25%, to 20,730.49 points.