Date:12th January 2026.
Gold Hits All-Time Highs as the Fed Faces Political Pressure.
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Gold rises to new all-time highs as US prosecutors opened a criminal investigation into Jerome Powell over the weekend. In addition, the latest NFP figures continue to support more interest rate cuts in 2026, also supporting Gold prices.
Analysts continue to point towards multiple reasons why institutions and investors are increasing Gold’s exposure levels. These include the threat to the Federal Reserve’s independence, employment data, and even US-EU tensions over Greenland. However, at what point is Gold too expensive?
HFM - Gold Daily Chart
Why Is the Federal Reserve Prompting Higher Gold Demand?
The tensions between the Federal Reserve and the Trump administration have been well documented. The US government believes the Federal Reserve is not cutting interest rates at the pace it should be. The Federal Funds Rate currently stands at 3.75%, which is 1.75% lower than the highs from 2024. That said, interest rates are still considerably higher than those seen over the past decade.
According to the Federal Reserve, they have been unable to cut at a faster pace due to tariffs creating uncertainties. More specifically, members of the Federal Open Market Committee had previously projected inflation would rise considerably due to tariffs. These projections have yet to materialise, providing Trump with additional grounds to criticize the Federal Reserve.
Tensions have been on the rise over the past few days as US prosecutors started a criminal investigation into the head of the Federal Reserve, Jerome Powell. The investigation is looking at whether Mr Powell misled Congress about the scope and cost of a major $2.5 billion renovation of the Federal Reserve’s Washington office.
President Trump and members of the administration have advised the cost is significantly higher than what the Chairman had disclosed. Particularly, Trump accused the Fed of adding ‘luxurious’ features to the renovation. However, Fed officials told journalists that these were later removed.
The question is whether Powell gave misleading or false testimony to Congress about the renovation. According to Jerome Powell, the investigation is political pressure to force the Federal Reserve to cut rates. He said it is also meant as personal retaliation for not cutting rates so far.
Powell told journalists the move raises concerns about the Fed’s independence. The risk to Federal Reserve independence is largely the development pushing Gold higher.
NFP - Mixed Employment Data
The NFP data from Friday had both positive and negative factors in the release. The Unemployment Rate fell back to 4.4%, lower than previous projections. However, the NFP Employment Change was only 50,000, lower than expectations.
The employment data for December indicates the sector remains resilient, but risks do remain. According to analysts, the figures indicate the need for interest rate cuts but are not weak enough to significantly pressure the Federal Reserve. The chances of a Federal Reserve rate cut still remain low, a 5% possibility. However, investors will monitor if this changes after tomorrow's CPI figures.
Gold (XAUUSD) - Technical Analysis
As Gold has been increasing for six consecutive months, most indicators, particularly momentum indicators, point towards the bullish trend continuing. The question is whether the price is trading at an overpriced level.
Certain timeframes do point towards the price potentially being overbought. For example, on the 4-hour timeframe, the price is trading at an overbought level on the RSI. In addition to this, on the daily timeframe, the price is forming a divergence pattern, which also signals a potential pullback.
Momentum and trend-based indicators continue to point upward, and the price stays close to its average, suggesting investors do not overvalue it. In addition, fundamental factors continue to support Gold’s price.
HFM - Gold 5-Minute Chart
Certain Wall Street banks are also supporting the bullish trend maintaining momentum this year. Goldman Sachs has given a target price of $4,900. Bank of America and JP Morgan have given a target of $5,000. However, in the short-term, for bullish signals to be valid, the price must remain above $4,542.75, according to the 200-bar MA.
Key Takeaways:
* Gold hit new all-time highs as US prosecutors launched a criminal investigation into Jerome Powell.
* Mixed NFP employment data supports the possibility of more Federal Reserve rate cuts in 2026.
* Investors increase Gold exposure due to Fed independence risks, employment trends, and US-EU geopolitical tensions.
* Technical indicators show Gold’s bullish momentum continues, though some timeframes signal potential overbought conditions.
* Major banks forecast Gold at $4,900-$5,000, with key support at $4,542.75 maintaining short-term bullish signals.
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Please note that times displayed based on local time zone and are from time of writing this report.
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Michalis Efthymiou
HFMarkets
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