'Fed Independence' Fears See Gold and Silver ETFs Surge
Wednesday, 7/23/2025 15:13
The GOLD PRICE held above $3400 for a record 2nd day running on Wednesday while silver set a new 14-year high in London trade as heavy inflows to bullion-backed ETFs were followed by worsening concerns over the US Fed's independence from political control.
Exchange-traded funds backed by gold already swelled last week to their largest size in almost 3 years, while No.1 silver ETF the iShares Trust (NYSEArca: SLV) grew to a 29-month high.
"This guy is a numbskull," said President Trump last night of Federal Reserve chair Jerome Powell.
"But he's going to be out pretty soon anyway. In eight months he'll be out" when Powell's current term ends.
"Market participants seem to agree that the risk to Fed independence is rising," says US investment bank Goldman Sachs' economist Jan Hatzius, noting last week's 6-month high in the 5-over-5 measure of inflation expectations in the bond market.
"A further increase [in market inflation fears] could make Fed officials more reluctant to cut."
Amid yesterday's
calls for Powell to quit or get fired, the giant SPDR Gold Trust (NYSEArca: GLD) grew by 0.8% with the biggest 1-day inflow in over 3 months taking the number of shares in issue back up to late-June levels.
No.2 gold ETF the iShares product (NYSEArca: IAU) meanwhile grew 0.2% to its largest size since October 2022.
With the SLV silver ETF expanding by more than 1.0% on Tuesday with its largest daily inflow in exactly 1 year, the price of silver bullion in London today fixed above $39 per Troy ounce for the first time since September 2011 at the City's 12 noon benchmarking auction.
Yesterday's
gold ETF inflows meanwhile saw global bullion quotes touch a 5-week high at $3439 per ounce as Wednesday's Asian trade began.
The gold price then fell $25 but recorded a second consecutive 3pm auction price above $3400 having fixed there once in April and once again in June.
"We are getting the process underway...and we're not in a rush," said Trump's Treasury Secretary Scott Bessent on Wednesday when asked about choosing Powell's replacement by Bloomberg TV.
"People aren't able to buy a house because...he keeps the rates too high and he's probably doing it for political reasons," Trump claimed last night.
"There's a real question about whether the Fed should be using its moral authority in areas you might call public policy," said former Treasury Secretary Larry Summers on Tuesday, joining bond-investment giant Pimco's former CEO Mohamed El-Erian as an economics professor now voicing "concerns" over Powell's position.
Fed Governor Christopher
Waller's comments at the weekend calling for softer monetary policy "have not increased the likelihood of the Fed cutting its key interest rate next week," says a note from German bank Commerzbank.
"But they do increase Waller's chances of succeeding Powell as Fed Chair next year [because they] are likely to be well received by US President Trump."
Any cut in rates which defies concerns over a tariff-led rebound in US inflation means "Gold would become significantly more attractive as a result of the depressed real interest rate," says the note.
"If other potential candidates for the Fed chair position share this view, the recent record high of around $3500 per Troy ounce [from April] is likely to approach quickly."
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