Gold prices broke above $3,500 per ounce for the first time as concerns grew that US President Donald Trump might dismiss Federal Reserve Chairman Jerome Powell, triggering a sell-off in US stocks, bonds, and the dollar.

After rising 2.9% in the previous session, gold climbed as much as 2.2% on Tuesday. Trump's call for an immediate rate cut by the Fed is seen as jeopardizing the central bank's independence, leading to the dollar hitting its lowest level since 2023.

Kallanish Index Services analyst Lee Liang Le said: "The rapid rise in gold prices this year tells me that confidence in the US is lower than ever before." She added that what was once termed the "Trump trade" has now evolved into a "sell America" narrative.

With trade tensions battering markets and eroding trust in US dollar assets, gold has surged by a third in 2025. Inflows into gold ETFs and purchases by central banks have supported the price rally, with gold rising every month this year.

The bullish momentum in gold has intensified this year, with some banks becoming increasingly optimistic about gold prices. Goldman Sachs (501.36, -8.13, -1.60%) forecasts gold could reach $4,000 per ounce by mid-next year. According to Jefferies, as investors question US assets like Treasury bonds, gold may be the only true safe-haven asset.

However, the recent sharp rise has exceeded some widely watched indicators, suggesting the rally could pause at some point. The 14-day relative strength index for gold prices surpassed 79, well above the 70 threshold indicating overbought conditions.

As of 14:27 Singapore time, spot gold was up 1.8% at $3,484.19 per ounce. The Bloomberg Dollar Index fell further after dropping 0.7% on Monday. Silver prices edged higher, while palladium and platinum also rose.