Gold hit a record high on Monday, reaching $4,600 per troy ounce, as the U.S. dollar weakened by 0.4% against a basket of major currencies. This surge followed news of a criminal investigation into Federal Reserve Chair Jay Powell by U.S. prosecutors, raising concerns about the independence of the central bank. As a result, futures for U.S. stocks also experienced declines, with the S&P 500 dropping by 0.6% and the Nasdaq 100 down 0.8%. The yield on the 10-year Treasury rose slightly, moving to 4.19%.
On Sunday, Powell revealed that the Federal Reserve received grand jury subpoenas regarding his testimony to Congress about a $2.5 billion renovation project at the central bank’s headquarters. Economic analysts are now expressing worries about the changing nature of the Federal Reserve, as Richard Yetsenga, chief economist at ANZ, noted that the institution’s historical role is becoming less defined.
Ongoing geopolitical tensions are also driving demand for gold, which is perceived as a key asset during periods of uncertainty. According to John Woods, chief investment officer for Asia at Lombard Odier, gold is uniquely responsive to geopolitical risks compared to other traditional investments such as bonds and equities.
Despite initial gains, gold’s price later stabilized around $4,580, remaining above its previous record of $4,549 set in late 2022. The investigation into Powell is part of a broader effort by the Trump administration, which has sought to push the Federal Reserve to adopt a more aggressive interest rate policy amid inflation concerns.
Why this story matters: The investigation into the Fed Chair raises questions about central bank independence in policy-making.
Key takeaway: Gold’s price surge highlights its role as a safe haven amid rising geopolitical tensions and concerns over financial governance.
Opposing viewpoint: The increasing influence of political motivations on the Federal Reserve’s actions is viewed by some as necessary for addressing economic challenges.
