A Trump-Constructed Fed – Implications for Gold and the USD

Head of Research

Aug 27, 2025

There has been no noticeable reaction to Trump’s call to stand Fed Governor Cook down for alleged dodgy dealings related to mortgage applications. Cook has defiantly vowed to stay on, raising the prospect of a lengthy legal battle in the courts. But this is important: if Trump can find a way to have her removed “for cause,” it would have big implications for the Federal Reserve.

If Cook does go, Trump would then nominate a new Fed governor, marking his fourth (of seven) appointment, which would give his picks a majority within the upper circle of the Fed.

Fed governors have a 14-year tenure in the role, and they each vote on policy at every FOMC meeting, whereas the 12 regional Fed members rotate their voting powers annually. Having four governors in position for such a long time—and who are essentially seen as aligned with Trump’s wishes—would further impact market perceptions of a loss of the central bank’s independence.

What’s also key is that all 12 regional Fed members face “reauthorisation” in February 2026. This event occurs every five years and is typically a non-event, smooth sailing. But this time, there are real challenges, as the vote to keep them in their positions is decided by the seven Fed governors. That puts a number of regional Fed members at risk of losing their jobs in February 2026 and subsequently being replaced with Trump-friendly regional governors.

And voilà… by May 2026, we could have a Trump-appointed Fed Chair, a Trump-appointed majority in the governor positions, and a number of Trump-aligned picks in the regional positions.

Of course, even if that were to play out—and the Cook vs Trump saga will likely drag on—the Fed would still need to set policy in line with the reality of the economic data. Even if heavily influenced by Trump, who essentially put them in the role, if inflation is at 3.2% and rising, while the labour market and growth remain resilient, and they cut rates at a meeting without an obvious justification, markets would take them to task for an absolute erosion of credibility. That would result in massive USD selling and a migration out of US assets— gold would fly.

So, they would still need to set policy according to the reality of the economic situation. But we could still be looking at a Federal Reserve constructed by Trump—and that could have major implications for how foreign investors view and have confidence in the USD and US markets.

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