Gold, Fed politicization, and Iran tensions push back to $4,600... CPI to determine the outcome

Gold, which had stepped back from the all-time high of around $4,630 yesterday, has regained the $4,600 level with the opening of the Asian markets.

What shook the market was the explosive statement from Fed Chair Powell. He went as far as to say that the Fed is “under criminal investigation,” revealing concerns about political pressure on the Fed, which firmly solidified safe-haven asset preference in the global markets.

Meanwhile, President Trump announced a 25% tariff targeting countries trading with Iran, further escalating geopolitical tensions. Amid rising uncertainties, gold continues to serve as a safe haven for investors.

Fed Independence Controversy, ‘Bullish’ for Gold

The “criminal investigation” card raised by Powell had impacts beyond mere words. The mention of a US Department of Justice subpoena, Senate hearings, and building renovation disputes fueled concerns that the independence of monetary policy could be compromised.

This has led to increased expectations of rate cuts, and historically, gold shines in low-interest-rate environments. Moreover, as policy uncertainties grow, investors instinctively shift assets into tangible assets like gold.

Iran Risk, Additional Geopolitical Premium

The Trump administration’s tightening of Iran sanctions goes beyond simple trade issues. The broad threat of a 25% tariff on trading partners with Iran signals increased uncertainty in the global economy.

As tensions escalate between Tehran and Washington, markets flock to traditional safe-haven assets like gold. This geopolitical premium is likely to support gold prices for the time being.

Short-term Outlook, December CPI Release

Currently, the biggest variable is the US December Consumer Price Index (CPI). The market consensus expects a 2.7% year-over-year increase, but the key is where the market’s forecast (期値) will head.

If CPI exceeds expectations: It will lead to a stronger dollar, which could put short-term downward pressure on gold, as gold is priced in USD.

If CPI slows down: Expectations of rate cuts may reignite, redefining the bullish case for gold.

Currently, gold is balancing between concerns over Fed policy credibility, geopolitical tensions, and inflation expectations. Until the CPI is released, the tug-of-war among these three factors is likely to determine whether gold remains firmly above $4,600.