Gold jumps to record highs amid Fed turmoil and rising geopolitical risks

LONDON (January 12) Gold (XAU/USD) kicks off the week with strong upward momentum, surging to fresh record highs near the $4,600 psychological mark as renewed concerns over Federal Reserve (Fed) independence fuel broad risk aversion. At the time of writing, XAU/USD trades around $4,583, up nearly 1.70% on the day.

Market sentiment has been shaken by an unprecedented development in the United States (US), where prosecutors have launched a criminal investigation into Fed Chair Jerome Powell.

The rising political pressure on the Fed undermines confidence in US monetary policy and weighs on the US Dollar (USD), while supporting Gold amid growing economic uncertainty.

At the same time, persistent geopolitical tensions continue to drive safe-haven flows into Bullion. Investors are closely monitoring nationwide protests in Iran, renewed US-Greenland rhetoric, and ongoing developments involving Venezuela.

Looking ahead, the focus this week turns to US economic data, with the Consumer Price Index (CPI) due on Tuesday, followed by Retail Sales and the Producer Price Index (PPI) on Wednesday, alongside a heavy slate of Fed speakers throughout the week.

Market movers: Geopolitical risks and Fed turmoil keep investors cautious

• The US Department of Justice (DoJ) issued grand jury subpoenas on Friday as part of a criminal investigation focused on Fed Chair Jerome Powell, linked to his Senate testimony on the Fed’s $2.5 billion headquarters renovation project.
• Chair Jerome Powell said in a video statement late Sunday that the DOJ action is politically motivated, stressing that it “is not about my testimony last June or about the renovation of the Federal Reserve buildings,” adding that those explanations “are pretexts.” Powell said the issue is whether the Fed can continue to set interest rates “based on evidence and economic conditions — or whether instead monetary policy will be directed by political pressure or intimidation.”
• On Sunday, US President Donald Trump threatened possible military action against Iran amid rising unrest and a mounting death toll. In response, Tehran warned it would target US army bases if Washington follows through on renewed threats to strike the country in support of protesters.
• US Secretary of State Marco Rubio is set to meet with Danish and Greenland officials this week as President Donald Trump doubles down on plans to acquire Greenland.
• Last week’s US labour-market data eased fears of a sharp deterioration in employment conditions and tempered expectations for a near-term Fed rate cut. However, traders continue to price in around two cuts later this year. The US economy added 50,000 jobs in December, below expectations for a 60,000 increase, but the softer headline was partly offset by a drop in the Unemployment Rate to 4.4% from 4.6%.

FXStreet