By Daniela Sabin Hathorn, senior market analyst at Capital.com

Gold continues its impressive rally as market confidence in the soundness of the US administration wavers. The latest headline shaking investor sentiment emerged over the Easter weekend, with reports suggesting that President Trump is exploring ways to remove Federal Reserve Chairman Jerome Powell. Although the Fed’s independence has long been a pillar of financial stability, these developments are casting doubt over its future — and markets are responding.

Trump has made no secret of his dissatisfaction with Powell’s monetary policy stance. On Wednesday, Powell warned that tariffs could lead to a temporary spike in both inflation and unemployment, possibly necessitating a rate hike. Trump promptly criticized the Fed Chair on Truth Social, accusing him of doing a poor job in lowering rates.

Over the weekend, senior government officials confirmed that the administration is actively examining legal avenues to replace Powell, further undermining market confidence. The central question is whether Trump could, in fact, dismiss the Fed Chair. The broad consensus has long been “no,” and that belief has served as a key reassurance for financial markets. Legally, a President may only remove a Federal Reserve Chair for cause — typically misconduct or dereliction of duty. While there is no clear evidence of such grounds in Powell’s case, there are concerns the administration may seek to stretch the interpretation of 'justifiable cause' to achieve its aims.

Compounding these fears is a pending legal case concerning the dismissal of two heads of independent US agencies. Chief Justice John Roberts has temporarily allowed the firings while the matter is under review by the Supreme Court. A ruling in favour of the administration could set a precedent that enables further dismissals — including that of Powell.

Such a move would carry significant implications. It could pave the way for interest rates to be set based on political motivations rather than economic fundamentals. Trump, a proponent of lower rates, would likely appoint a dovish successor to Powell, potentially triggering a sharp rate-cutting cycle that could reignite inflationary pressures. History has shown the importance of maintaining a separation between monetary and fiscal policy — and markets clearly prefer it that way.

The threat to the Fed’s independence has added fuel to an already bullish gold market. Investors increasingly view the precious metal as a safe haven in times of political and economic instability. This latest chapter in Washington has only intensified that demand.

Gold (XAU/USD) daily chart

Gold (XAU/USD) has been on a tear, accelerating higher after rebounding from support at $3,000 two weeks ago. Amid heightened uncertainty, the appetite for gold remains strong, and prices could soon break above $3,500. Although this level acted as resistance on Tuesday — with the RSI pushing deeper into overbought territory — the broader trend remains upward. A technical pullback may be on the horizon, but recent price action suggests such dips are viewed as buying opportunities by investors