Gold tops $4,500 as Fed independence concerns rise

Gold prices reach new historical highs amid Fed independence concerns

Gold futures contracts have struck fresh record highs as uncertainty intensifies regarding the Federal Reserve’s independence. The GCG26 contract rose by 2.53% to reach $4,614 per ounce, representing a cumulative year-on-year return of 72% and a year-to-date gain of approximately 6%.

Demand for the bullion has remained resilient, underpinned by a convergence of fundamental drivers: anticipated monetary easing, continued reserve accumulation by central banks, and strategic hedging against global geopolitical and commercial instability. In recent hours, political uncertainty in the United States has surged following reports that the US Department of Justice has raised the possibility of opening an investigation into Fed Chairman Jerome Powell. According to Reuters, the allegations center on comments made by the Chair before Congress regarding a building renovation project.

In response, Jerome Powell characterized the accusation as a "pretext" by the White House to exert greater influence over national monetary policy. This development signifies a delicate conflict of interest between the executive branch and the central bank, fueling broader concerns regarding the future of the Fed’s autonomy under the current administration.

Geopolitical instability and the flight to quality

Beyond domestic policy concerns, international tensions remain a primary catalyst for gold’s ascent. The ongoing diplomatic conflict over Greenland between the US and Denmark remains unresolved. Simultaneously, friction between the US and Iran remains acute, with markets remains wary of a possible military intervention or attack. Furthermore, strained relations between the US and several Latin American nations—notably Mexico, Colombia, and Cuba—have provided a constant backdrop of regional uncertainty.

Consequently, the pursuit of "safe-haven" assets by institutional investors, central banks, and hedgers has become a sustained phenomenon. This demand is being realized through both the acquisition of physical bullion and gold-indexed financial instruments, such as exchange-traded funds (ETFs) and futures contracts.

Technical analysis of gold

From a technical perspective, gold futures maintain a robust long-term bullish trajectory. Key observations include:

• Trend Context: In the long term, gold exhibits a clear market structure defined by "higher highs" and "higher lows." The price continues to respect its primary moving averages (50, 100, and 200 periods), confirming the strength of the underlying trend.
• Resistance Levels: Should the $4,800 psychological barrier be breached to the upside, the next significant ceiling is identified at $5,000 (a prominent psychological level). A sustained move above these levels would suggest a potential extension into uncharted price territory.
• Support Levels: If the short-term support at $4,380 is invalidated, the next structural floor is located at $4,000—a major psychological level that aligns closely with the 100-day moving average. A breach of the $4,000 zone would increase the likelihood of a major market correction.
• Momentum Indicators and Volume: The Moving Average Convergence Divergence (MACD) is currently exhibiting a bearish divergence, suggesting that bullish momentum may be waning. Additionally, the Relative Strength Index (RSI) is trading near overbought territory. Nevertheless, the Volume Profile and contract volumes indicate that demand remains consistent, implying that fundamental hedging requirements are likely supporting the current price action.

Figure 1. Gold Future Contract GCG26 (2024–2026). Source: Data from the COMEX Exchange; own analysis conducted via TradingView.