USD Weakness and Preference for Gold Driven by Risks to Fed Independence

USD Weakness and Preference for Gold Driven by Risks to Fed Independence

(Based on the New York Times report that federal prosecutors have opened an inquiry related to Fed Chair Powell, and on President Trump’s intensified criticism of the Federal Reserve.)

The current market is entering a phase where capital flows are increasingly shaped by the theme of:

“USD selling and GOLD buying.”

This is not being driven by interest rate differentials or economic data.
It is being driven by growing concerns over the credibility and independence of the U.S. financial system itself.

According to the New York Times, federal prosecutors have begun an inquiry related to Fed Chair Powell.
While the nominal issue is the cost of renovations at the Fed headquarters, the market is interpreting this as political pressure on monetary policy.

Chair Powell himself has described the situation as “highly unusual” and political in nature, accelerating fears that the independence of the Federal Reserve is being challenged.
As a result, concerns about institutional risk are rapidly being priced into the market.

■ Drivers of USD Weakness (as of January 12, 2026)

The current USD selling pressure is not about macro data or rate spreads, but about:

“A decline in confidence in the U.S. financial system itself.”

Key factors include:

• The President exerting pressure on the Fed Chair through the judicial process

• The visible risk of political interference in monetary policy

• Uncertainty ahead of the Fed Chair transition in 2026

• A reduction in the “institutional stability premium” historically embedded in the USD

This is causing a reassessment of the dollar:

From a “safe-haven currency”
to a “currency carrying political and institutional risk.”

At present:

• The USD is broadly weak

• Against the dollar, NZD and CHF are relatively resilient

• Markets are prioritizing institutional risk over interest-rate differentials

Capital is not moving uniformly.
It is flowing selectively toward:

• CHF for safety and stability

• NZD for relative currency attractiveness and positioning

■ Drivers of Gold Buying (as of January 12, 2026)

Gold is no longer being viewed simply as an inflation hedge.
It is increasingly being treated as:

“A refuge from uncertainty in currencies and the financial system.”

Main reasons:

• Erosion of central bank independence undermines confidence in fiat currencies

• Demand for assets detached from political control

• Rising uncertainty across currencies, bonds, and monetary policy frameworks

Market psychology is shifting toward:

“The safest asset is one that no one can control.”

As a result:

• Gold remains firm

• Silver is following gold higher

• Precious metals are being revalued as currency substitutes and ultimate safe assets

■ Current Market Structure (Morning of January 12, 2026)

This is not an “inflation-driven market.”
It is more accurately described as:

“A market that has begun to price in institutional instability.”

■ Strategic Perspective

• Gold remains favored on pullbacks

• USD rebounds are likely to be limited until political risk is resolved

• Precious metals are becoming the core assets for risk avoidance

• In FX, CHF (safety) and NZD (selective capital inflows) remain relatively strong against USD

The current phase can be summarized as:

“Since the news of January 12, 2026, markets have begun to choose assets that are free from institutional and political control rather than traditional currencies.”

This marks a structural shift in how safety is being defined in the global financial system.