BY MIRABEL ODETA
Gold surged to a record high on Monday while the U.S. dollar and Wall Street futures fell sharply, as a criminal investigation into Federal Reserve Chair Jerome Powell rattled global markets and raised fresh concerns about the independence of the world’s most powerful central bank. Investors reacted swiftly to the escalating political pressure on the Fed, driving demand for safe-haven assets amid a volatile and eventful start to 2026.
Gold prices jumped more than 1.5%, pushing bullion to around $4,600 an ounce, as traders sought protection from political and economic uncertainty. At the same time, S&P 500 and Nasdaq futures dropped more than 0.6% ahead of the U.S. market open, while the VIX volatility index surged by its largest margin since November, reflecting a sharp rise in investor anxiety. Bond markets also adjusted, pricing in a slightly higher probability of near-term U.S. interest rate cuts as confidence in policy stability wavered.
The latest market shock follows confirmation from Powell that the Trump administration had threatened him with a criminal indictment over his congressional testimony. Powell described the move as a “pretext” designed to pressure the central bank into cutting interest rates, warning that it represents an unprecedented escalation in political interference. Economists and analysts said the development marked a dramatic intensification of a long-running clash between President Donald Trump and the Fed chair, a feud that dates back to Powell’s early years in office.
For investors, the episode has added to an already turbulent geopolitical backdrop. The opening weeks of 2026 have seen the United States capture Venezuelan leader Nicolas Maduro and openly discuss asserting control over Greenland, moves that have unsettled global markets. Against this backdrop, investors have increasingly turned away from risk assets, favoring gold and other traditional havens.
Currency markets reflected the shift in sentiment, with the dollar weakening broadly, even against typically risk-sensitive currencies such as the Australian and New Zealand dollars. The dollar index slid about 0.4% in European trading, putting it on course for its biggest one-day drop since mid-December. Analysts noted that repeated attacks on the Fed’s independence have become a key downside risk for the greenback, which already suffered a steep decline in 2025 amid rate cuts, widening fiscal deficits and persistent political uncertainty.
Safe-haven currencies such as the Swiss franc strengthened, while the euro and sterling also gained. European equities were more resilient, with the STOXX 600 hovering near record highs as defense-related stocks climbed, reflecting ongoing geopolitical tensions.
Silver joined gold in rallying sharply, leaping about 5% as rising geopolitical risks, particularly around Iran, boosted demand for precious metals. Tensions intensified after President Trump said he was weighing strong responses, including possible military options, to a violent crackdown on protests in Iran that represent one of the most serious challenges to the country’s clerical leadership since the 1979 Islamic Revolution. Iranian officials insisted the situation was under control, but investors remained cautious.
Oil prices, however, moved lower as traders showed limited immediate concern over supply disruptions. Brent crude slipped to just below $63 a barrel, while U.S. West Texas Intermediate fell to around $58.60 a barrel. Despite last week’s strong gains, analysts said the oil market was still underestimating the risk of a broader conflict, particularly if tensions were to threaten shipping through the Strait of Hormuz.
U.S. equity futures were dragged down primarily by financial stocks, as banks came under pressure from both market volatility and new policy proposals. In addition to targeting the Fed, President Trump has called for a one-year cap on credit card interest rates at 10%, a move that weighed heavily on bank and consumer finance shares in premarket trading. Major lenders and credit card companies posted steep declines as investors assessed the potential impact on profitability.
Looking ahead, traders are bracing for a packed week of economic data and corporate earnings, including U.S. inflation figures, Chinese trade data and results from major U.S. banks. For now, however, attention remains firmly fixed on the escalating standoff between the White House and the Federal Reserve, a conflict that analysts warn could undermine confidence in U.S. institutions and keep markets on edge.
As one strategist put it, the open confrontation between the U.S. administration and the central bank is unsettling for investors and damaging for the dollar. With political pressure mounting and global tensions simmering, markets appear set for continued volatility, and gold’s record-breaking rally underscores just how fragile investor confidence has become.
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