Fed’s Next Move Revealed: When Is Rate Cut Coming? | Axel Merk

Powell's potential forced exit

Trump may attempt to fire Powell if he doesn't resign by May, creating constitutional uncertainty that may require Supreme Court resolution regarding the President's authority over Fed governors.

Warsh policy alignment underway

Powell has preemptively adopted Warsh's priorities including productivity boom rhetoric and communication strategy reform, effectively preparing the institution for leadership transition.

Independence premium

Central bank autonomy lowers borrowing costs by preventing markets from demanding risk premiums on politically influenced monetary decisions.

Maintaining heavy exposure

Merk remains heavily invested in gold and miners despite recent price run-ups, having sold only minimal personal holdings while maintaining fund mandates requiring sector participation.

Resisting market timing

Precious metals funds must remain invested through volatility rather than attempt to time entries and exits, managing risk via hedging within sector confines.

Cash competition dynamics

Gold's short-term price pressure correlates inversely with real interest rates, as rising rates increase the relative value of cash versus bullion.

Policy reaction drives gold

Gold rallies when policymakers implement economically unsound interventions like price controls or stimulus checks in response to supply constraints rather than from the shocks themselves.

Reduced recession vulnerability

The modern service-based US economy and domestic energy export capacity reduce recession vulnerability to oil price spikes compared to historical precedents.

Temporary disruption pricing

Markets view Iran Strait of Hormuz risks as transient, with potential disruption costs of $1-2 per barrel being absorbable by global producers without derailing growth.