Gold Nears $3400 as political pressures

28 August 2025

Written by Samer Hasn, Senior Market Analyst at XS.com

Gold Nears $3400 as political pressures on the Fed stir inflation fears and weigh

Gold has corrected slightly from its twenty-day highs while trading close to the $3400 level

The gold’s recent strength has been closely tied to Federal Reserve Chair Jerome Powell’s dovish leanings, expressed in his Jackson Hole remarks last Friday, alongside President Trump’s dramatic decision to oust Fed Governor Lisa Cook.

The combination has amplified expectations for monetary easing, though markets remain cautious, with the probability of a 75-basis-point rate cut before year end still priced below 40% according to the CME FedWatch Tool.

This tempered outlook reflects the balance between optimism for looser policy and the lingering risk that political interference in the Fed could unsettle inflation expectations and undermine credibility.

Chief Economics Commentator of the Wall Street Journal Greg Ip underscored that such politicization of the central bank would likely usher in structurally higher and more volatile inflation, distort market expectations, and corrode investor confidence in the Fed’s independence.

While the WSJ Editorial Board went further, drawing parallels to Turkey under Erdogan and Argentina’s chronic instability, as well as to Richard Nixon’s pressure on Fed Chair Arthur Burns in the 1970s which helped ignite the “great inflation.”

Both analyses converge on the warning that if Trump succeeds in bending the Fed to his will, the U.S. could face an inflationary regime shift that investors have yet to fully discount.

For gold, this backdrop adds a deeper structural layer to the bullish narrative: its role as a hedge is being reinforced not only by cyclical easing expectations but also by the specter of lasting institutional fragility in U.S. monetary governance.

This tension between cyclical relief and structural risk also resonates in equity markets. Nvidia’s latest earnings revealed record sales but failed to sustain the exuberance of past quarters, with data-center revenue missing estimates for the second time in a row and guidance judged underwhelming.

The result was a pullback of nearly 3% in its shares. Layered on top of this is geopolitical uncertainty, with a $4 billion hit from suspended H20 chip sales to China and no new revenues from that line expected next quarter.

The uncertainty around U.S.-China trade frictions leaves Nvidia’s growth outlook clouded, showing how political forces are reshaping corporate trajectories just as they are reshaping monetary policy.

Nvidia shares on Germany’s XETRA exchange fell by more than 2% today, raising concerns that the New York session could open lower and potentially spark a broader market downturn. While such weakness might intuitively be seen as supportive for gold, a sharp market flush could instead unleash waves of liquidations and margin calls. This dynamic may ultimately force the unwinding of gold positions as well, leading to an even deeper correction in the precious metal.

 

Zaid Barem / ymm