The following is a comprehensive analysis based on the nature of the event, market reactions, and institutional views:
I. Event Characterization: A "Constitutional Crisis" Far Beyond the Legal Scope
Core Conflict: The U.S. Department of Justice's criminal investigation of Chairman Powell (involving his testimony regarding the June 2025 Federal Reserve building renovation project) has been widely interpreted by the market as political pressure from the White House on the independence of the Federal Reserve's monetary policy. Powell himself stated that the investigation was due to threats he received for not complying with the president's wishes to cut interest rates.
Market Interpretation: This move shakes the cornerstone of the modern central bank system. Authoritative analysis defines it as a "constitutional crisis," eroding the "Federal Reserve independence premium" built up over decades—the market's trust that monetary policy is free from political interference.
Direct Consequences: The Federal Reserve's future policy path will be significantly clouded. To maintain its reputation, the Fed may become more conservative in its interest rate decisions in the short term, or even pause rate cuts, which contradicts government expectations and increases the risk of policy missteps and stagflation.
II. Market Impact: Safe-haven trading dominates, bull market logic faces test
The event has triggered a sharp and logical immediate market reaction:
Risk assets under pressure: US stocks (S&P 500, Dow Jones) fell significantly, and volatility surged. Banks and real estate sectors, which are sensitive to interest rates and rely on a stable policy environment, suffered heavy losses.
Double Dow credit damaged: The dollar weakened due to damage to the stability of the US system and the credibility of dollar assets.
Safe-haven assets surged: Gold prices rose rapidly. US Treasury yields rose due to increased "risk premiums" (price declines), which contradicts traditional safe-haven logic and reflects investors' concerns about US sovereign credit.
How long the bull market can continue its run depends on the evolution of this crisis. If the crisis escalates, institutional uncertainty will become a more crucial pricing factor than economic data. Corporate profit prospects and valuation models will need to incorporate a higher political risk premium, potentially disrupting the bull market entirely.
III. Gold Price Analysis: A Core Beneficiary Amidst the Storm
The latest forecasts from major financial institutions also confirm this. Overall, the upward drivers for gold in 2026 are clear:
Direct Safe-Haven Demand: Market panic and capital flight triggered by this crisis are the most direct short-term drivers of gold prices.
Weakening of the Dollar's Credibility: The Federal Reserve's independence has been compromised, which will weaken the dollar's credibility as the global reserve currency in the long run, highlighting gold's role as an alternative currency.
Macroeconomic Background Support: The massive US debt and fiscal expansion policies constitute long-term currency depreciation and inflationary pressures, forming the basis for a gold bull market.
Potential Risks: If the incident unexpectedly and quickly subsides (e.g., investigation withdrawn or political settlement achieved), the easing of market panic may lead to a short-term pullback in gold prices. Furthermore, if the Federal Reserve delays interest rate cuts to demonstrate its "strength," the opportunity cost of holding gold may increase in the short term.
IV. Scenario Analysis and Key Monitoring Points
Scenario 1 (Baseline Scenario, High Probability): The investigation becomes protracted, and political maneuvering continues. Federal Reserve policy remains deadlocked, and market volatility remains high. Gold will receive sustained support and rise amid fluctuations.
Scenario 2 (Crisis Escalation): Prosecutors formally indict Powell, or tensions between the White House and Congress intensify. This will lead to increased market panic and a sell-off of risk assets. Gold's safe-haven properties will be maximized, and prices may quickly reach or even exceed institutional target ceilings.
Scenario 3 (Crisis Easing): The investigation is proven to lack evidence, or political pressure subsides. Market sentiment will recover quickly, and risk assets will rebound. Gold faces profit-taking pressure, but the fundamental logic of a long-term bull market remains intact.
Key Monitoring Indicators:
Event Progress: Next statements from the US Department of Justice/White House, congressional hearings, and Powell's future.
Market Signals: VIX fear index, US dollar index, and the real yield on 10-year US Treasury bonds.
Fund Flows: Global gold ETF holdings and changes in long positions in the futures market.
V. Comprehensive Assessment and Strategy Reference
In summary, barring major risk events, gold prices in 2026 will benefit from the interest rate cut cycle and central bank gold purchases, and are expected to trade within the core range of $4800-$5100. However, if extreme political risks like the "Powell storm" materialize, it will become the "trigger" for a market explosion, and gold prices are very likely to quickly test and break through the high of $5400. The direction will depend on the duration and depth of the crisis.
Summary: The "Powell storm" at the beginning of 2026 is essentially a crisis of institutional trust. It has forced global capital to reassess the risk premium of US assets. Against this backdrop, the traditional narrative of "a soft economic landing fueling a bull market" has temporarily given way to the narrative of "institutional risks triggering hedging." Therefore, gold has evolved from an ordinary asset allocation tool into a "core insurance" against macroeconomic uncertainty. Whether the bull market (especially in US stocks) can continue will depend entirely on the trajectory of this crisis; and regardless of how the crisis unfolds, gold's strategic value in hedging tail risks and currency devaluation has been significantly enhanced in 2026.
