The pound climbed to its highest level in seven months on Tuesday and gold prices surged to a record high above $3,500 per ounce, as investors dumped equities in favour of traditional safe-haven assets amid deepening fears over US political interference in monetary policy.
Sterling briefly broke above $1.34 against the dollar — its highest since September — before easing to $1.338. Against the euro, the pound gained 0.12 per cent to reach €1.163, on track for its longest winning streak against the US currency since 1971.
The market reaction came in response to a renewed barrage of criticism from President Donald Trump, who labelled Federal Reserve chairman Jerome Powell “a major loser” and demanded interest rate cuts, warning of a looming economic slowdown unless his calls were heeded.
Gold rallied sharply on investor jitters, climbing to a new high above $3,500 before settling at $3,469.13 per troy ounce in morning trading in London. Analysts cited growing concerns about the Federal Reserve’s independence as the key driver of the rush into gold.
“The broad sell-off was triggered by rising concerns over Fed independence,” analysts at Deutsche Bank said. “Yesterday’s market moves were the clearest sign yet of investor anxiety over the topic.”
Equity markets reflected the nervous sentiment. On Wall Street, the S&P 500 shed 2.36 per cent on Monday, while the Dow Jones Industrial Average fell 2.48 per cent and the tech-heavy Nasdaq dropped 2.55 per cent — marking one of the sharpest one-day declines this year.
Europe followed suit on Tuesday, with the pan-European Stoxx 600 index slipping 0.65 per cent. Germany’s Dax dropped 0.18 per cent, France’s CAC 40 fell 0.23 per cent, and Italy’s FTSE MIB slid more than 1.2 per cent.
London’s FTSE 100, however, bucked the broader trend. The index overcame early losses to climb 0.48 per cent, or 40 points, to 8,316.30, while the FTSE 250 edged up by 0.03 per cent to 19,255.82.
Commodity markets offered mixed signals. Brent crude rose 1.09 per cent to $66.98 a barrel, while WTI crude added 0.98 per cent to $63.70. Despite the day’s gains, both benchmarks remain significantly lower than at the start of the year.
Bitcoin, often seen as a digital hedge against inflation and market instability, rose 1.06 per cent to reach $88,429, maintaining its volatile upward momentum amid the global economic uncertainty.
With Trump’s intensifying pressure on the Fed and investors increasingly wary of political meddling in central bank decision-making, analysts warn that volatility could persist in the days ahead — particularly if Fed officials push back publicly or market expectations around interest rates shift dramatically.
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Pound hits seven-month high and gold surges past $3,500 as weak dollar and Trump-Fed row shake markets