Open this photo in gallery: A smelter operates an induction furnace during the production of gold-bearing dore bars in a processing plant at Varvarinskoye gold deposit in the Kostanay region, Kazakhstan, on April 16.Pavel Mikheyev/Reuters U.S. President Donald Trump’s next target – the independence of the Federal Reserve – is giving gold investors another reason to stick with their winning trade. Gold futures rallied more than 3 per cent on Monday, driving the price to a record US$3,432 an ounce, and some observers expect that the rally has plenty of life left in it. The commodity has risen more than 27 per cent this year, offering an offset to volatile stock prices and rising bond yields. Over the past two weeks alone, the price of gold has gone virtually straight up, gaining nearly US$460 an ounce. Mr. Trump deserves some credit. The chaos he has unleashed through his erratic tariffs on trading partners has eroded consumer confidence and pushed investors away from U.S. assets, while raising concerns about global economic activity. Gold has been a popular haven for investors during this bout of global uncertainty. What’s more, Mr. Trump’s economic policies are weighing on the U.S. dollar, which has slumped toward a three-year low against a basket of currencies. The lower dollar adds a tailwind to gold, which is priced in U.S. dollars. Now, gold may be reacting to Mr. Trump’s attacks on Fed chairman Jerome Powell. On Monday, Mr. Trump called on the Fed to cut its key interest rate immediately – even as he insists that his policies are good for the U.S. economy – just days after the Fed chair suggested that the central bank was more concerned about price stability than labour market conditions. The President lashed out: “There is virtually no inflation,” he said in a Truth Social post that also called Mr. Powell a “major loser.” Last week, Mr. Trump insisted that he had the power to dismiss Mr. Powell before the Fed chairman’s term ends in 2026, despite Mr. Powell’s belief that the President lacks the legal authority to do so. Any attacks that erode the Fed’s independence – which is often tasked with making monetary policy decisions that are unpopular with politicians – could undermine the central bank’s responsibility for maintaining a target inflation rate of about 2 per cent. Observers who have been keen on the long-term case for gold – which partly rests on central banks diversifying their international reserves and adding significant demand for bullion – now expect that upbeat predictions are within reach. “Our US$4,000 target by the end of this year looks increasingly realistic. If that happens, then US$5,000 would be our target for the end of 2026,” Ed Yardeni, chief investment strategist at Yardeni Research, said in a note last week. Max Layton, an analyst at Citigroup, estimated that investment demand for gold will rise to more than 110 per cent of mine supply during the current quarter of this year, up from his previous estimate of 95 per cent, creating a supply-and-demand imbalance. “This would be its highest level since the global financial crisis and second highest level in over 25 years, and is set to see prices rally to US$3,500 an ounce over the next three months,” Mr. Layton said in a note. The share prices of gold producers have been outperforming the underlying commodity. The NYSE Arca Gold BUGS Index, which tracks global gold producers, has risen 45.6 per cent so far this year, outperforming the S&P 500 by more than 58 percentage points. Among Canadian stocks, Agnico-Eagle Mines Ltd. has gained nearly than 50 per cent over this period, while Kinross Gold Corp. is up 54 per cent and Endeavour Mining Corp. is up 55 per cent. Despite the gains, some analysts believe that gold stocks remain cheap, as share prices trail expectations for significant profit growth this year. “This rally continues to fall short of earnings upgrades, leaving valuations at the lower end of its historical range, and a clear signal that prices continue to lag fundamentals and remain underappreciated,” Bhawana Chhabra, senior market strategist at Rosenberg Research, said in a note. Carey MacRury, an analyst at Canaccord Genuity, estimates that senior producers trade at an average of just 0.62 times their net asset value – a popular approach to valuing mining stocks based on future cash flows – which is at the low end of an historical range between 0.62 and 0.97 times net asset value. “Despite gold’s strong move, the equities continue to have room to close the gap with gold,” the analyst said in a note.