Gold set a new record Monday after the United States Department of Justice threatened to criminally prosecute Federal Reserve chair Jerome Powell over a building project, sparking concern that the U.S. central bank might struggle to operate free of political control.
Spot gold rose 2.3% to $4,616.57 an oz. Monday morning, taking its climb over the past year to about 73%, Trading Economics data show. Spot silver surged 6.8% to $85.40 an oz. for a 12-month gain of 187%.
On Friday, the Department of Justice served the Fed with grand jury subpoenas as it threatened a criminal indictment related to Powell’s June 2025 testimony before the U.S. Senate Banking Committee. That testimony included comments about a multi-year project to renovate historic Fed office buildings, whose cost has jumped to about $2.5 billion (C$3.5 billion).
The criminal investigation marks a sudden escalation in U.S. President Donald Trump’s spat with Powell, whom he has repeatedly criticized over the past year for ignoring calls to cut rates or acting too slowly. The Fed’s 25 basis-point reduction in September was its first since 2020.
The new developments bring “the independence of the Fed again into sharp focus,” BMO Capital markets commodities analysts Helen Amos and George Heppel wrote Monday in a note. Investors are seeking “hedges to concerns over U.S. dollar devaluation amid prospects for further monetary easing.”
Safe-haven demand
When combined with violent protests in Iran, the recent capture of Venezuela President Nicolas Maduro and ongoing U.S. threats to take over or acquire Greenland, the prospect of a Powell indictment is “keeping safe-haven demand for metals elevated,” Amos and Heppel wrote.
The justice department’s “unprecedented” action “should be seen in the broader context of the administration’s threats and ongoing pressure,” Powell said Sunday night in a two-minute video posted to the Fed’s website.
“The threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the President. This is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions — or whether instead monetary policy will be directed by political pressure or intimidation.”
Geopolitics
Rising geopolitical risks could push gold above $5,000 during the first half of 2026, though a steep correction may follow in the second half, analysts at HSBC wrote in a report last week. HSBC sees the yellow metal rising to as much as $5,050 an oz. by June 30 – up from a previous target of $5,000.
For all of 2026, HSBC expects gold to trade within a wide range that could go as low as $3,950 per oz. following a correction. The decline could be significant should geopolitical risks subside or if the Fed stops cutting interest rates, HSBC said.
Analysts at J.P. Morgan Global Research strike a more reserved note. Gold prices are expected to push toward $5,000 an oz. by the fourth quarter of 2026, with $6,000 a possibility longer term, they wrote in a report last month.
Gold surged 65% in 2025 – its strongest performance in almost half a century – as retail and institutional investors joined central banks in ramping up purchases.
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