Gold prices rose to a more than two-week high on Tuesday (August 26th), after US President Donald Trump said he would fire Federal Reserve Chairwoman Lisa Cook, a move widely seen as eroding the central bank's independence and undermining confidence in US assets.

Spot gold rose 0.4% to $3,379.05 an ounce at 08:03 GMT, after hitting its highest level since August 11th earlier in the session. US gold futures for December delivery rose 0.3% to $3,425.80.

On Monday, Trump took the unprecedented action of firing Cook over claims of mortgage loan abuse. "Investors view Trump's move as an attempt to secure a dovish majority among Fed members... which jeopardizes the Fed's independence and adds uncertainty to the market, prompting investors to buy gold," said Carlo Alberto De Casa, an external analyst at Swissquote.

Non-yielding gold bullion tends to perform well in low-interest rates and amid economic uncertainty. SPDR Gold Trust, the world's largest gold-backed exchange-traded fund (ETF), said its holdings rose 0.18% to 958.49 metric tons on Monday from 956.77 tons on Friday.

On Friday, Fed Chairman Jerome Powell hinted at the possibility of an interest rate cut at next month's Fed meeting, saying that risks to the labor market have increased but inflation remains a threat, and that a decision is not final. "The market is pricing in a 25 basis point rate cut (in September). A large rate cut would further support gold, but I don't see that as a likely scenario because Fed members are (probably) concerned about a slowdown in the labor market, but they are still considering inflation risks," De Casa added.

Investors are now watching the Personal Consumption Expenditures Price Index, the Fed's preferred inflation measure, due on Friday for further clues on the direction of the central bank's monetary policy. Elsewhere, spot silver rose 0.4% to $38.71 an ounce, platinum fell 0.4% to $1,336.66, and palladium rose 0.7% to $1,093.50.(alg)

Source: Reuters