Gold hit a fresh record high on Monday, extending a blistering rally as investors piled into havens amid a swirl of geopolitical and policy shocks in recent days.
Spot gold advanced 2% to hit over $4,600 an ounce for the first time, before paring gains slightly, data from LSEG showed. Prices have risen around 6% this year alone so far.
An investigation into Federal Reserve Chairman Jerome Powell and speculation over whether it could hasten a leadership change at the Fed has added a fresh layer of policy risk: “Especially if it results in him stepping down and then leaving the Fed earlier than scheduled and is replaced by someone more in favor of rate cuts,” said Morningstar equity analyst Jon Mills.
Federal prosecutors are examining a $2.5 billion renovation of the Fed’s Washington headquarters and Powell’s testimony to Congress, Powell said Sunday night. The Fed Chair added that the investigation stems from President Donald Trump’s long-running frustration with the Fed’s reluctance to cut interest rates as aggressively or as quickly as he has urged.
The scenario that the appointment of a new Fed Chair may pave the way for faster interest-rate cuts, is traditionally supportive for gold. Lower interest rates tend to lift gold by reducing the opportunity cost of holding a metal that pays no yield. That effect has been amplified by recent U.S. economic data that pointed to a cooling labor market.
Latest flashpoints involving Iran and Venezuela also further catalyzed gold’s appeal as a safe haven. (CNBC)