Gold hit $4,647.60 per ounce on January 14, 2026—more than double its price two years ago. The metal has now surged 64% in 2025 alone, its best annual performance since 1979, when inflation peaked at 13.5% and the Iranian Revolution upended oil markets.
Three forces are converging. Central banks have bought over 1,000 tonnes of gold for three consecutive years, diversifying away from dollar assets. The Federal Reserve faces unprecedented political pressure, with Chair Jerome Powell now under DOJ criminal investigation. And mass protests in Iran—with over 2,400 dead—have triggered Trump's threat of 25% tariffs on any country doing business with Tehran. Investors are piling into the one asset that sits outside any government's control.
If the Fed delivers 2-3 rate cuts as expected, Powell remains under investigation, and Iran instability persists, gold continues its upward trajectory. J.P. Morgan forecasts $5,055/oz by Q4 2026; HSBC sees momentum carrying prices to $5,000 in H1. Central bank buying of 585 tonnes per quarter sustains structural demand. ETF inflows continue as retail investors chase performance.
2
Rally Stalls Below $5,000 as Fed Holds Steady
Discussed by: State Street Global Advisors, Deutsche Bank
If inflation proves stickier than expected or the DOJ investigation resolves without major fallout, the Fed maintains rates longer than markets anticipate. Dollar strength returns, reducing gold's appeal. After a 64% gain in 2025, profit-taking and technical overbought signals trigger consolidation in the $4,000-$4,500 range. Historical pattern: gold averaged 8% annual gains over 30 years.
3
Gold Spikes to $6,000 on Geopolitical Escalation
Discussed by: Yardeni Research, Saxo Bank
Iran's government falls or the U.S. intervenes militarily. The Trump tariff threat triggers breakdown of the U.S.-China trade truce. Oil spikes past $100/barrel. Powell is indicted or removed, markets question dollar-denominated asset safety. In this scenario, gold becomes the primary safe haven for institutional capital fleeing uncertainty. Yardeni Research has set a $6,000 target.
The Supreme Court rules on Fed independence, blocking executive interference. Powell investigation collapses or concludes without charges. Iran protests subside or U.S. steps back from tariff threat. With safe-haven demand ebbing and no rate cuts materializing, gold experiences a correction similar to post-1980, when Volcker's inflation-fighting ended the rally. Prices could retreat 20-30% from highs.
Historical Context
Gold's 1979-1980 Rally
January 1979 - January 1980
What Happened
Gold exploded from $226 to $850 per ounce in under a year—a 275% gain. The drivers: double-digit inflation peaking at 13.5%, the Iranian Revolution disrupting oil supplies, and Soviet intervention in Afghanistan. Investors fled paper currencies for the one asset governments couldn't print.
Outcome
Short Term
Gold peaked at $850 in January 1980, then crashed as Paul Volcker's Fed raised rates to 19-20% to crush inflation.
Long Term
Gold languished between $300-500 for most of the 1980s. It took until April 2025—45 years—to exceed the 1980 peak in inflation-adjusted terms.
Why It's Relevant Today
Today's rally shares the Iranian connection and safe-haven psychology, but differs fundamentally: central banks are now buying gold rather than selling, and the threat to Fed independence is political rather than inflationary. The 1980 crash required a Volcker-style policy response; no such intervention appears imminent.
Treasury-Fed Accord (1951)
February 1951
What Happened
President Truman pressured the Fed to keep interest rates low to manage post-war debt. After Truman falsely claimed the Fed had pledged support for his policy, the conflict came to a head. Treasury Secretary John Snyder and Fed Chair Thomas McCabe negotiated an accord that formally established the Fed's operational independence.
Outcome
Short Term
The Fed gained authority to set interest rates based on economic conditions rather than Treasury financing needs.
Long Term
The accord became the foundation of modern central bank independence worldwide, a principle now embedded in economic consensus.
Why It's Relevant Today
The DOJ investigation into Powell represents the most significant challenge to Fed independence since 1951. Unlike Truman's pressure, which was public and eventually resolved through negotiation, the criminal probe introduces a new mechanism of potential executive control. Markets are treating this as a structural shift.
Nixon Pressure on Arthur Burns (1971-1972)
1971-1972
What Happened
Richard Nixon, fearing a recession would cost him the 1972 election, pressured Fed Chair Arthur Burns to keep rates low. Burns accommodated. Nixon won reelection in a landslide. Inflation subsequently spiraled, contributing to the stagflation crisis that dominated the rest of the decade.
Outcome
Short Term
Nixon secured his political goal; Burns maintained his position but lost credibility.
Long Term
The episode became a textbook case for why central bank independence matters. The inflation Burns enabled required Volcker's painful 1979-1982 intervention to resolve.
Why It's Relevant Today
The Trump-Powell dynamic echoes Nixon-Burns, but with a crucial difference: Burns quietly accommodated; Powell is publicly resisting. The criminal investigation escalates beyond rhetorical pressure to potential removal of the Fed Chair—a step Nixon never took.
