Gold Hits Record $4,620 as DOJ Investigation Threatens Fed Independence
Criminal probe into Powell marks first prosecutorial action against a sitting Fed Chair
Criminal probe into Powell marks first prosecutorial action against a sitting Fed Chair
Overview
No sitting Federal Reserve Chair has ever faced a criminal investigation. On January 9, 2026, Jerome Powell became the first, when the DOJ served grand jury subpoenas over his congressional testimony about a $2.5 billion headquarters renovation. Gold immediately broke $4,600 per ounce—up 72% in twelve months—as investors priced in the possibility that the world's most important central bank could lose its operational independence.
Powell called the investigation 'pretextual,' framing it as retaliation for the Fed's refusal to cut rates faster. Treasury Secretary Bessent told Trump the probe 'made a mess,' while twelve global central bank governors issued a joint statement of 'full solidarity.' The dollar index fell below 99 for the first time since 2017. With Powell's term ending in May, the standoff will determine whether the Fed remains insulated from political pressure—or becomes a battleground.
Images from Openverse under Creative Commons licenses.
Key Indicators
$4,620
Gold Price (Record High)
All-time high reached January 13, 2026, as investors fled U.S. assets
72%
Gold Rally (12 Months)
Year-over-year increase driven by central bank buying and safe-haven demand
98.9
Dollar Index (DXY)
Near decade-low as Fed independence concerns accelerate dollar weakness
12
Central Banks Backing Powell
Global central bank governors signed joint solidarity statement
People Involved
Jerome Powell
Chair, Federal Reserve Board of Governors (Under DOJ criminal investigation; term expires May 2026)
Jeanine Pirro
U.S. Attorney for the District of Columbia (Leading criminal investigation into Fed Chair Powell)
Scott Bessent
U.S. Secretary of the Treasury (Expressed opposition to Powell investigation internally)
Anna Paulina Luna
U.S. Representative (R-FL-13) (Filed original criminal referral against Powell)
Thom Tillis
U.S. Senator (R-NC), Banking Committee Member (Pledged to block all Fed nominees until investigation resolved)
Organizations Involved
BO
Board of Governors of the Federal Reserve System
Central Bank
Status: Subject of DOJ criminal investigation
The U.S. central bank, responsible for monetary policy and financial system stability.
U.
U.S. Department of Justice
Federal Agency
Status: Conducting criminal investigation into Fed Chair
Federal law enforcement agency now investigating the Federal Reserve Chair for alleged perjury.
Timeline
Gold Hits Record $4,620; Global Central Bankers Back Powell
Market
Gold reaches new all-time high. Twelve central bank governors—ECB, Bank of England, and others—issue joint statement of 'full solidarity' with Powell.
Trump Calls Powell 'Incompetent or Crooked'
Political
Trump escalates rhetoric: 'That jerk will be gone soon.' Senator Tillis pledges to block all Fed nominees until investigation resolved.
Gold Breaks $4,600; Dollar Falls
Market
Gold hits record $4,568, then $4,616. Silver surges to $84.88. Dollar index falls to 98.9 as investors flee U.S. assets.
Bessent Tells Trump Investigation 'Made a Mess'
Political
Treasury Secretary expresses concern about market impact; sources say he expected Powell to resign, not dig in.
Powell Releases Defiant Video Statement
Statement
Powell calls investigation 'pretextual,' says it's retaliation for the Fed setting rates 'based on our best assessment' rather than 'the preferences of the President.'
DOJ Serves Fed with Subpoenas
Legal
U.S. Attorney Jeanine Pirro's office issues grand jury subpoenas to the Federal Reserve over Powell's June testimony.
Trump Attempts to Fire Lisa Cook
Legal
First presidential attempt to remove a Fed governor in the central bank's 112-year history. Courts block the action.
Fed Governor Cook Accused of Mortgage Fraud
Legal
FHFA director accuses Fed Governor Lisa Cook of mortgage fraud; DOJ opens investigation. Trump attempts to remove her from the board.
Luna Files Perjury Referral
Legal
Rep. Anna Paulina Luna sends criminal referral to AG Bondi alleging Powell lied under oath about renovation features.
Trump Discusses Firing Powell
Political
Trump reportedly shows legislators a draft letter to fire Powell during congressional meeting.
Powell Testifies on Renovation
Congressional
Powell tells Senate Banking Committee the $2.5B headquarters renovation does not include luxury features. This testimony becomes the basis for perjury allegations.
Fed Begins Rate-Cutting Cycle
Policy
First of five quarter-point cuts since Trump won 2024 election, from 4.5-4.75% toward 3.5-3.75%.
Powell Reconfirmed for Second Term
Appointment
Biden reappoints Powell; Senate confirms him for four more years as Fed Chair.
Trump Calls Powell 'Enemy'
Political
After trade war escalation, Trump questions whether Powell or Xi Jinping is a greater 'enemy' of the U.S.
Trump Criticizes Powell Over Rates
Political
Trump says he is 'not thrilled' with Powell's rate hikes, beginning years of public pressure on the Fed.
Powell Takes Fed Chair
Appointment
Trump's nominee Jerome Powell sworn in as 16th Fed Chair, the first without an economics degree.
Scenarios
1
Powell Serves Out Term, Investigation Stalls
Discussed by: Wall Street analysts, Fortune, Bloomberg
Powell remains in office until May 2026. The investigation produces no indictment, either because prosecutors lack evidence of intentional false statements or because the case becomes politically untenable. Trump nominates a successor (Waller, Hassett, or Warsh), but Senator Tillis's pledge to block nominees delays confirmation. Powell stays on the board after his Chair term expires, as previous chairs have done. Markets stabilize as the crisis loses urgency.
2
Powell Indicted, Constitutional Crisis Escalates
Discussed by: Democracy Docket, academic legal analysts, international observers
DOJ indicts Powell for perjury or false statements. Powell refuses to resign, arguing the charges are pretextual. Legal battle ensues over whether a sitting Fed Chair can be prosecuted while in office. Global central banks escalate their response. Gold surges toward $5,000 as HSBC projects. Dollar reserve status comes under sustained pressure. The Fed's ability to conduct monetary policy is impaired by the distraction and political uncertainty.
3
Fed Independence Permanently Weakened
Discussed by: Council on Foreign Relations, former Fed officials, JPMorgan CEO Jamie Dimon
Even without conviction, the precedent of prosecuting a Fed Chair chills future monetary policy decisions. Trump's successor proves more compliant on rates. The Fed loses credibility as an inflation-fighting institution. Inflation expectations rise, forcing higher long-term interest rates even as the Fed cuts short-term rates. The 1970s pattern—political interference leading to stagflation—partially repeats. Dollar's reserve share continues declining toward 50%.
4
Backfire: Fed Independence Strengthened
Discussed by: Fortune, Wall Street strategists, Senator Tillis
Bipartisan backlash to the investigation leads to legislative action protecting Fed independence. The investigation collapses or produces acquittal. Future administrations face higher political costs for pressuring the Fed. The episode becomes a cautionary tale that reinforces norms. Gold rally reverses as crisis premium evaporates. However, this scenario requires sustained Republican opposition to the administration—currently limited to a few senators.
Historical Context
Nixon-Burns Affair (1970-1974)
1970-1974
What Happened
President Nixon pressured Fed Chair Arthur Burns, his friend and appointee, to keep rates low before the 1972 election. The Nixon tapes captured Nixon demanding Burns 'start expanding the money supply.' Burns wrote in his diary that Nixon 'looked wild' and 'was going mad.' Nixon's team floated proposals to pack the Fed board with loyalists and planted false stories about Burns demanding pay raises.
Outcome
Short Term
Burns accommodated Nixon. Inflation reached double digits by 1974.
Long Term
The stagflation decade required Paul Volcker's painful rate hikes to 20% to break. The episode became the textbook case for why central bank independence matters.
Why It's Relevant Today
The current investigation represents a more direct attack—criminal prosecution versus pressure campaigns—but the mechanism is the same: using executive power to push for looser monetary policy. Research estimates Nixon-era pressure permanently raised the U.S. price level by 8%.
Turkey Central Bank Crisis (2019-2023)
July 2019 - 2023
What Happened
President Erdogan fired three central bank governors in two years for resisting his demand for lower rates. He replaced them with loyalists who cut rates even as inflation soared. Erdogan, citing Islamic principles, insisted high rates cause inflation—contradicting mainstream economics.
Outcome
Short Term
The Turkish lira lost 44% of its value in 2021 alone. Inflation peaked at 85% in 2022.
Long Term
Turkey's central bank lost credibility entirely. International investors fled. The lira became essentially uninvestable for foreign institutions.
Why It's Relevant Today
Turkey shows the endpoint when central bank independence is eliminated: currency collapse and inflation spiraling beyond control. The U.S. case differs in scale—the dollar's reserve status provides more cushion—but the mechanism of political interference producing inflation expectations is identical.
Treasury-Fed Accord (1951)
March 1951
What Happened
Since WWII, the Fed had been required to support Treasury bond prices, effectively surrendering control of interest rates. After inflation hit 21% during the Korean War, Fed Chair Thomas McCabe and the Treasury reached an accord allowing the Fed to set rates independently. President Truman was furious and pressured McCabe to resign.
Outcome
Short Term
McCabe resigned within weeks. But the independence framework survived.
Long Term
The Accord established the modern Fed's operational independence, considered foundational to 70 years of relative price stability.
Why It's Relevant Today
The 1951 Accord shows that Fed independence was itself won through conflict with the executive branch. The current crisis tests whether that settlement holds when a president is willing to deploy prosecutorial power rather than just political pressure.
