Escalating conflict between the White House and the Fed causes Gold to rise – Commerzbank

The Gold price surpassed the $3,400 per troy ounce mark yesterday and climbed further to a five-week high, Commerzbank's commodity analyst Carsten Fritsch notes.

Upside for Gold above $3,400 is looking increasingly limited

"Market reports cite Fed rate cut expectations as the reason for this. However, these have not risen further in recent days. Fed Funds Futures continue to price in an 85% probability of a rate cut in September. By the end of the year, rate cuts of slightly more than 50 basis points are priced in. There has been no change here since the beginning of the week. More important for the Gold price recently has been the escalating conflict between the White House and the Fed."

"Fed Governor Cook filed a lawsuit against US President Trump yesterday over her dismissal. This could lead to a lengthy legal battle involving several courts. The reputation and independence of the Fed are at stake. US Vice President Vance added fuel to the fire in the dispute with the Fed. In his opinion, the government will not allow monetary policy decisions to be made without the input from the people who were elected to serve the American people."

"In other words, Vance is demanding that the US government should have a say in monetary policy. This would mark the end of independent monetary policy. Gold is benefiting from this uncertainty, as shown by inflows into Gold ETFs of just under 15 tons in the last two days. Nevertheless, the upside for Gold above $3,400 is looking increasingly limited."