Gold, silver hit record highs as US Justice Dept probe targets Federal Reserve
- Federal Reserve chief confirms Justice Dept probe.
- Gold surges 1.6% to nearly $4,600 per ounce.
- Silver approached $85 per ounce; dollar falls by 0.2%.
SINGAPORE/HONG KONG: Precious metals gold and silver on Monday hit new records as investors digested news that the US Justice Department is probing the Federal Reserve, raising fears over US central bank independence.
Federal Reserve Chair Jerome Powell confirmed the “unprecedented” move late Sunday, which he blasted as part of US President Donald Trump’s pressure campaign for another rate cut.
Gold surged 1.6% to nearly $4,600 per ounce, while silver approached $85 per ounce, both records, as investors sought safe havens.
The dollar fell about 0.2% against major peers, according to Bloomberg.
“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,” Powell said in a statement late Sunday.
Powell said the bank received grand jury subpoenas on Friday related to his Senate testimony in June, which had been about a major renovation project of Federal Reserve office buildings.
The Fed has indicated it would hold interest rates steady in its closely watched meeting at the end of this month.
“The subpoenas mark a clear break in the long-held boundary between politics and monetary policy, a line markets once assumed was untouchable,” Stephen Innes of SPI Asset Management told AFP.
“Investors are not weighing the odds of charges so much as the risk that political pressure has crept into the Fed´s decision-making,” Innes added.
Commenting on the development, Ray Attrill, head of FX strategy at National Australia Bank in Sydney, said: “Powell has had enough of the carping from the sidelines and is clearly going on the offensive”.
“This open warfare between the Fed and the US administration —and to the extent that you take Powell’s comments at face value — it’s clearly not a good look for the US dollar,” Attrill added.
The dollar had advanced in early Asian trade to a one-month high after Friday’s jobs report bolstered expectations the Federal Reserve will hold interest rates later this month, while reports of hundreds of deaths during protests in Iran heightened geopolitical tensions and stoked demand for safe havens.
Financial markets are preparing for a busy data calendar this week, with Tuesday’s release of the US consumer price index for December providing one of the last key economic releases before the Federal Reserve’s next monetary policy meeting at the end of January.
“US inflation remains above the Fed’s target of 2.0%, and this may limit the FOMC’s ability to cut rates further barring a material loss of momentum in the US economy,” analysts from Standard Chartered wrote on Sunday, saying further rate cuts are unlikely.
“The labour market is not deteriorating further, and this should — at the margin — keep some upward pressure on both US Treasury yields and the US dollar,” they added.
Meanwhile, banks kick off the fourth-quarter earnings season in the coming week, with strong profit growth this year a crucial source of optimism for stock investors. A ruling from the Supreme Court on the legality of Trump’s emergency tariffs could also be released as soon as Wednesday.
