Gold Pulls Back as News of Trump’s Fed Chair Nominee Boosts Dollar

Reports about a likely Trump nominee to head the Federal Reserve boosted the dollar and caused the price of gold to retreat for the first time in nearly a fortnight. Media reports indicated that Trump would name Kevin Warsh as the Fed chair to replace Jerome Powell whose term is coming to an end in a few months.

The retreat in the price of bullion once this news broke continues the wild price swings that have characterized the closing days of the week after gold climbed sharply to reach record price levels.

According to Bloomberg News, Trump is going to name Kevin Warsh as the incoming Fed chair. Warsh has for long been known for his hawkish views on matters of inflation, but over the past months, he has publicly argued in favor of reducing interest rates. These views have brought him into alignment with Trump, and possibly paved the way for his nomination.

As this news filtered through, the dollar gained 0.5% and this had an adverse effect on the bullion market. When the dollar is strong, gold tends to retreat because investors or buyers who hold different currencies now find bullion more expensive since their currencies have to first be converted into dollars in order to complete gold acquisition transactions.

Some market strategists, such as Christopher Wong, aren’t surprised by this market retreat. They say such retreats are expected each time a commodity’s price climbs rapidly. Consequently, he adds, a correction was going to happen at any time, and the news about Warsh provided the trigger for that correction.

This pullback notwithstanding, gold has rallied by approximately 20% from the start of the year. This run has largely been fueled by Trump’s dismantling of the longstanding global order through his tariff policies, unilateral decision to abduct a sitting president from Venezuela, and threats to levy heavy tariffs on any nation that sells oil to Cuba. He had also threatened tariffs on European countries opposed to his desire to annex Greenland, though he has since backtracked and softened his stance. His attacks on the Fed’s independence have also rattled markets and supported gold’s rally.

On a positive note, the U.S. avoided a possible government shutdown after a tentative agreement was reached between the GOP and Democrats in the U.S. Senate. Additional talks are ongoing but the shutdown risk has been averted. Markets are watching and any sign of further economic or geopolitical turmoil could send bullion prices soaring again.

Entities like Platinum Group Metals Ltd. (NYSE American: PLG) (TSX: PTM) in the gold mining industry will also have an ear out to assess any global developments that could impact the bullion market.

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