(Kitco News) - The Federal Reserve’s monetary policy and questions surrounding its political independence were key bullish factors expected to drive gold prices to record highs in 2026; however, analysts were not expecting this issue to become a driving force this early in the new year.
Sunday evening, in a prepared video statement, Federal Reserve Chair Jerome Powell said the Department of Justice had served the central bank with subpoenas and threatened it with a criminal indictment over his testimony this summer regarding the Federal Reserve’s building renovations.
The subpoena relates to Powell’s comments made during his testimony before the Senate Banking Committee in June, concerning the Fed’s $2.5 billion renovation of two office buildings. President Donald Trump has been a vocal critic of the renovation costs, saying they are excessive.
However, Powell bluntly characterized the threat of criminal charges as a “pretext” to undermine the Fed’s independence when it comes to setting monetary policy.
“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,” Powell said.
This is only the latest salvo the Trump administration has launched against the Federal Reserve. It has been trying to remove Federal Reserve Governor Lisa Cook from the central bank’s monetary policy committee since August. The attempt to fire her is based on allegations that she made false representations on mortgage agreements several years ago. However, Cook has not been charged with any civil or criminal offense.
Trump has been aggressively trying to stack the U.S. central bank with dovish members who would support substantial rate cuts this year.
Powell’s announcement that the central bank has been subpoenaed quickly drove gold prices to a record high of $4,600 during the Asian trading session.
While the yellow metal is off its highs at the start of the North American session, it continues to see solid gains. Spot gold last traded at $4,602 an ounce, up 2% on the day.
Looking ahead, analysts expect U.S. monetary policy uncertainty to create further tailwinds for gold.
In a note published in November, Rhona O’Connell, Head of Market Analysis at StoneX, said that questions surrounding the Fed’s independence could create the next $500 move in gold.
“We have been talking about the potential threat to central bank independence for some months now. The separation of powers between the Executive, the Legislature and the Judiciary is a key cornerstone to the US Constitution,” O’Connell said in an updated note Monday. “This latest development is not directly an issue, but Jay Powell has made it plain that he sees it as such, rendering this to be about more than just the risk of the central bank falling under undue influence from the Executive. It remains a key tailwind for gold, although the price is already carrying a substantial risk premium.”
Alex Kuptsikevich, Chief Market Analyst at FxPro, noted that gold will continue to benefit from further weakness in the U.S. dollar as Trump’s threats against the Federal Reserve drive the anti-fiat currency trade.
“The growth of public debt and attacks on central banks are increasing interest in debasement trading,” he said.
