Gold-plated fear

The latest spike in the gold price comes after a torrid week of geopolitics surrounding Greenland, capped by President Trump's abrupt U-turn on military and trade threats against the Arctic island and its European backers, respectively.

While the about-face has lowered tensions, it was a hollow victory for Trump's NATO allies, some of whom fear lasting damage to the alliance in light of the president's erratic, centralized foreign policy decision-making.

And the spectre of trade tensions still looms large as tariff threats against other allies remain live. Trump lashed out at Canada again on Saturday, threatening 100% tariffs over Prime Minister Mark Carney's pending trade agreement with China.

Meantime, the dollar plunged to two-month lows against the yen amid speculation about joint U.S.-Japan action to prop up Japan's currency. This followed reports on Friday that the New York Fed had checked dollar/yen rates with dealers – considered a precursor to intervention. Any U.S. involvement would reinforce the belief that Washington wants a weaker dollar generally.

At home, the fatal shooting of another anti-ICE protester in Minneapolis has further raised U.S. political tensions in what is a crucial election year for the Trump administration. What's more, the furore could risk a partial government shutdown later this week. Chuck Schumer, the Senate's top Democrat, said on Saturday night his party would vote against funding legislation that includes money for the Department of Homeland Security.

And the impacts of Winter Storm Fern, which has ravaged much of North America, continued to be felt in the energy markets on Monday as oil prices edged higher thanks to output disruptions. This came after a more than 2% rise in the previous session.

Aside from a weaker dollar, this morning has also seen steady U.S. stocks and a slip in Treasury yields ahead of Wednesday's Fed meeting – where policy is expected to remain unchanged – and the release of a raft of earnings this week from the likes of Apple, Microsoft, Tesla, and others.

The battle for Federal Reserve independence has already gone up several gears this year, yet the central bank is showing little sign of capitulation - and now it has support from the Supreme Court and senior politicians.

Whether that has emboldened the Fed to push back hard on pressure for faster rate cuts will be the key test this week.

Clearly angered by this month's threat of a criminal case against him over Fed building renovations, outgoing Fed Chair Jerome Powell has sharpened his tone on Fed independence, calling the Trump administration's attack on him a mere "pretext" to pressure the Fed into deeper interest rate cuts.

An acceleration of easing almost certainly won't begin at this week's Federal Open Market Committee (FOMC) meeting. But how Powell maps out the policy path going forward and addresses questions about political pressure may be the main takeaway - especially with a real chance U.S. President Donald Trump announces his pick to replace Powell as the two-day gathering unfolds.

Graphics are produced by Reuters.

Graphics are produced by Reuters.

Gold surged to a record high above $5,100 an ounce on Monday, marking a more than 18% increase this year. That's following a 64% spike in 2025, its biggest annual gain since 1979. The dramatic rise has been driven by safe-haven demand, U.S. monetary policy easing, robust central bank purchases, and record inflows into exchange-traded funds.

Meanwhile, silver climbed above the $100 mark for the first time on Friday, building on its 147% rise last year as retail-investor flows and momentum-driven buying compounded a prolonged spell of tightness in physical markets for the metal.

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