The US Senate is on track to fill vacancies on the Fed's Board of Governors.
Just recently, the Senate has approved the candidacy of former economic adviser to President Donald Trump, Judy Shelton, for the vacant seat on the Federal Reserve, and it is assumed that her position will be confirmed by the Senate. Trump's first two nominees did not receive Senate approval.
But Shelton's confirmation was rather doubtful, as she once advocated raising interest rates after the 2008 financial crisis, and in 2019, she said interest rates should be lowered to zero.
In addition, Shelton was a proponent in returning the US dollar to the standard of gold.
"It makes perfect sense to wonder about linking monetary resources - the value of dollar to gold and digital currencies - rather than relying on the judgment of a dozen monetary officials who meet eight times a year to set interest rates," she once said in a commentary posted on Wall Street Journal.
This year, Shelton supports Trump's view that rates should be close to zero.
Nevertheless, economists and analysts do not see Shelton as a big threat to the Fed.
"I don't think Judy Shelton will have any direct impact on the monetary policy. Fed Chairman Powell leads the discussion at regular Fed meetings and seeks to build consensus. Shelton will be able to voice her views, but she will need to convince other committee members of her views to be of practical value. I don't see this happening, "said Michael Pearce, a senior economist at Capital Economics.
The biggest fear among Shelton's critics is that if Trump wins, he could nominate Shelton as the new Fed chairman after Powell's term ends in 2022, and the Fed may lose some of its independence because of it.
Meanwhile, some analysts believe that Shelton may be a good incentive for a gold rally.
"After all, if she ends up on the board, she has to be pragmatic," said Nick Picard of Horizons ETF.
"When Powell started, he wanted to raise the stakes. However, at that time, the rate hike was wrong and he was forced to change his position. Even if Shelton makes mistakes, she will have to correct them. The main thing to remember is that rates remain low over time, and nothing but an unexpected V-shaped global recovery will change that, "
"Central banks are linked all over the world. There is too much debt in the world. We will have low rates for a long time. Will Shelton's words make a big difference? I think there is nothing she can do about the global financial situation. It will have to maintain low rates for a long time, " he added.
Caroline Bain of Capital Economics also said that Shelton's nomination would not stop the gold rally. "Indeed, longer-term rate cuts and the risk of rising inflationary expectations are positive factors for the gold price," Bane said.
"Shelton may even drive up the price of gold because she is the leader in printing more money," said Frank Holmes of Global Investors.
"Central banks are cutting rates, but that doesn't mean that money is coming to you. And if they put that money in ETFs where your investments are located, they grow, "
"This means gold is also growing. Shelton will be a supporter of a monetary policy that is designed to print money."
"The White House wants to inject another trillion dollars into the economy. We have a huge amount of printed money. It is unprecedented that the Fed will have to buy ETFs or bonds. " Holmes added.
