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Key Takeaways
- Gold rose to a record-high $4,640 an ounce on Monday morning following news the Justice Department has launched a criminal investigation related to testimony by Federal Reserve Chair Jerome Powell.
- The investigation renewed investor concerns about the independence of the Fed, which has long been insulated from the influence of elected officials.
- President Donald Trump on Sunday denied knowledge of the investigation.
Gold prices surged to a record high Monday as investors turned to the traditional safe haven amid fresh concerns that the independence of the Federal Reserve could be jeopardized.
The Justice Department on Friday threatened Fed Chair Jerome Powell with criminal indictment related to his testimony before the Senate last June, according to a statement released Sunday. Powell dismissed the Justice Department’s investigation into his testimony as “pretexts” for the White House to resume pressuring the Fed to lower interest rates at the president’s behest.
“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,” said Powell on Sunday.
Gold futures were up nearly 2.7% at $4,625 an ounce recently, after hitting an all-time high of $4,640 earlier in the day.
The precious metal rallied more than 4% last week, driven in part by investor concerns about sticky inflation and expectations for more interest rate cuts from the Fed this year, according to John Stoltzfus, chief investment strategist at Oppenheimer.
Why This Matters
The loss of the Federal Reserve’s independence from political pressure would be a major threat to the legitimacy of U.S. monetary policy, with far-reaching consequences for U.S. Treasury markets and the dollar, two pillars of the global financial system. During times of economic uncertainty, many investors turn to gold as a store of value.
The investigation revealed on Sunday marks the second attempt by the Trump administration to remove a Fed policymaker through prosecution. President Donald Trump tried to fire Fed Governor Lisa Cook last year after accusing her of mortgage fraud. The Supreme Court temporarily blocked her dismissal and is expected to hear arguments in her case next week.
President Trump on Sunday denied allegations that the investigation was part of his efforts to pressure the Fed into lowering interest rates. “I don’t know anything about it,” Trump told NBC News. “What should pressure him is the fact that rates are far too high,” he said. “That’s the only pressure he’s got.”
The Federal Reserve cut interest rates at each of its last three meetings in response to signs of weakness in the labor market. Still, policymakers are deeply divided on how to proceed considering inflation remains above their 2% target. With the central bank’s two goals—stable prices and maximum employment—in tension, the majority of investors don’t expect the Fed to cut interest rates again until June.
