Gold Holds Firm as Fed Uncertainty and Tariff Risks Keep Haven Demand Alive

Gold retreated after testing recent highs, but the underlying bid for the metal remains intact as traders weigh fresh signs of Fed policy divergence, heightened political drama in Washington, and escalating tariff skirmishes worldwide.

Fed in Focus: Williams Calms, but Caution Lingers

Markets are firmly pricing in a September rate cut, with odds exceeding 90% according to futures data. New York Fed President John Williams reinforced those expectations, signalling policymakers are prepared to ease further if upcoming economic indicators justify the move.

Yet, his remarks carried a note of caution, the Fed will remain data dependent, watching GDP revisions, weekly jobless claims, and pending home sales for confirmation. For traders, this means volatility risk around mid tier data is elevated, particularly as the debate shifts from whether the Fed cuts to how far and how fast.

Fed Autonomy Under Pressure

The standoff between President Trump and Fed Governor Lisa Cook is emerging as a new market risk. Reports suggest Cook is preparing legal action against Trump’s attempt to remove her  a clash that could test the Fed’s institutional independence.

Any erosion of perceived autonomy risks undermining confidence in US policymaking, with potential knock-on effects for Treasury markets, the dollar, and global risk sentiment. For gold, this political uncertainty continues to provide a structural cushion against sharp downside moves.

Trade Flashpoints Return

Global trade frictions are re-intensifying:

• The US slapped punitive tariffs on Indian imports in retaliation for its Russian oil purchases.
• Mexico and Canada signalled new tariff measures on Chinese goods.
• US-Japan trade talks stalled after Tokyo’s negotiator abruptly cancelled a Washington visit.

The flare up of protectionist measures reintroduces a 2018-style trade risk backdrop, reinforcing the bid for havens and complicating the global growth outlook.

SARACEN MARKETS VIEW: Gold Is Not Just a Trade, It’s a Hedge

• Fed rate cut expectations remain entrenched, but traders should be alert to data surprises that could challenge the consensus.
• Fed independence is now a live risk variable, not background noise. Legal or political shocks here can trigger outsized safe-haven flows.
• Trade tensions are broadening, ensuring haven demand won’t fade quickly even if gold consolidates.

For traders, this makes gold less about chasing breakouts and more about portfolio insurance against policy credibility and geopolitical shocks.

Disclaimer: This report is for informational purposes only. It does not constitute investment advice or represent the official views of any central bank or regulatory body.