Gold hits new $4,600 record as investors worry about Fed independence

Gold soared to a record $4,600, reflecting increasing market concern about the Fed’s independence. Investors flooded the metal market after the United States government launched a criminal investigation into Fed Chair Jerome “Jay” Powell, driving the dollar lower. This, in turn, prompted a rush into safe-haven assets.

Silver also rallied on expectations of a weaker dollar and elevated market caution, climbing more than 5% in recent trading, with prices in markets such as India hitting fresh all-time highs on local exchanges.

Powell probe rattles market

Jerome Powell stated that the United States Department of Justice had sent official papers, formally known as grand jury subpoenas, to the Federal Reserve. The Justice Department also warned Powell could face a criminal indictment.

The investigation concerns what he told Congress about a $2.5 billion renovation of the Federal Reserve headquarters. As the United States’ central economic authority, the Fed monitors interest rates, the money supply, and policies that influence jobs, prices, and borrowing.

Since the dollar is the world’s primary reserve currency, the Fed’s decisions are monitored by governments, banks, and investors alike across the globe. Its recent inquiry prompted experts to question what effect the U.S. government might have on the central bank.

Investors are now wondering whether the Fed can actually act independently or whether political pressures might drive its financial policies.

When investors fear that political influence is at play by the central bank, they are largely worried about inflation, interest rates, and stability. Fear drove plenty of people to purchase gold. When gold prices climbed, the US dollar weakened, dipping about 0.3% against other major world currencies. Meanwhile, stock markets reacted sharply. 

Futures for the S&P 500 fell about 0.6%, and futures for the Nasdaq 100 dipped about 0.8%. That signals that investors were moving away from riskier assets, like stocks, and toward safer alternatives, like gold.

The U.S. government, under President Donald Trump, has been pushing for faster and sharper interest rate cuts, despite concerns from some experts that overly aggressive rate cuts could trigger inflation. This adds to the tension between the Fed and the administration.

Investors flock to gold as risk appetite sours

Gold climbed as much as 2% to around $4,600 per troy ounce, briefly touching a new record. Later, gold prices cooled slightly and traded around $4,580, still above the previous record of $4,549 set at the end of 2022.

Gold is widely regarded as a safe-haven asset. This means people purchase it when they are uncertain or frightened about the future. Gold is free of dependence on governments, businesses, or politics.

It retains its value, even in the event of a currency devaluation or a decline in the stock market. That is part of the reason gold is widely viewed as durable, a rock to cling to in uncertain times. Several financial experts concurred that the investigation into Powell raised new questions about the direction of U.S. monetary policy. Some said the Fed, as they have understood it, might be changing in response to the political climate.

Global geopolitical tensions are another significant factor contributing to the rise in gold prices. Days before this price surge, the U.S. military captured Venezuelan leader Nicolás Maduro.

Since then, President Donald Trump has indicated thinking about deploying military forces in Iran in light of violent protests inside the nation. When signs of potential wars, military action, or significant conflicts between countries emerge, many investors tend to opt for gold. 

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