US dollar falls, gold jumps to record high on criminal probe into Fed chair Powell

SINGAPORE – The US dollar and stock futures fell on Jan 12 as US prosecutors opened a criminal investigation into Federal Reserve chair Jerome Powell, a dramatic escalation of the Trump administration’s attacks on the US central bank.

Gold, meanwhile, broke through US$4,600 an ounce for the first time, while silver also hit a record high, as investors snapped up safe havens due to heightened geopolitical uncertainties and growing bets on US interest rate cuts after the ramped-up attack on the Fed.

The escalating tension in the US is fuelling market anxiety over the central bank’s autonomy. 

The US dollar index fell as much as 0.3 per cent in Asia trading, snapping a five-day winning streak, with the greenback weakening against almost every major currency. 

The sell-off revives debate over just how far a US president can and should influence the nation’s rate stance, which in recent decades have been insulated from political interference to ensure price stability. It is also reviving questions on whether investors should reduce exposure to US assets and the dollar – a theme that dominated global markets in April 2025 when President Donald Trump announced universal tariffs.

Mr Trump seems adamant about exerting control over the Fed, “potentially undermining the Fed’s monetary policy independence”, said Ms Fiona Lim, a senior foreign exchange strategist at Maybank in Singapore.

“Trump’s impatience and resolve to get borrowing costs lower suggest that his pick for the next chair could be a dove and a loyalist and that could be a risk to the greenback,” she said.

Spot gold rose as much as 2 per cent to a record peak of US$4,601.17 an ounce. It was last up 1.5 per cent at US$4,577.46. Spot silver was up 3.5 per cent at $82.72 an ounce, after hitting an all-time high of $83.96 earlier in the day.

Mr Powell in a video statement on Jan 11 said the Trump administration had threatened him with a criminal indictment over his congressional testimony on renovations of the Fed’s headquarters, an action that Mr Powell called a “pretext” aimed at putting further pressure on the Fed to lower rates.

Mr Trump has repeatedly slammed Mr Powell on social media, urging rate cuts and at one point threatening to fire him – before later backing off and denying he ever considered it.

“Powell has had enough of the carping from the sidelines and is clearly going on the offensive,” said Mr Ray Attrill, head of foreign exchange strategy at National Australia Bank in Sydney.

“This open warfare between the Fed and the US administration – and to the extent that you take Powell’s comments at face value – it’s clearly not a good look for the US dollar.”

Earlier on Jan 12, the dollar had advanced in early Asian trading after Jan 9’s jobs report bolstered expectations the Fed will hold interest rates later this month, while reports of hundreds of deaths during protests in Iran heightened geopolitical tensions and stoked demand for safe havens.

The deadly protests in Iran have increased the haven appeal of precious metals, with the possibility that the Islamic republic could be overthrown injecting uncertainty into geopolitics and oil markets.

Mr Trump said on Jan 11 he was mulling over potential options on Iran, while also reiterating threats to take Greenland and questioning the value of the NATO alliance, just over a week after seizing Venezuelan leader Nicolas Maduro.

“It’s a reminder of how many uncertainties markets are juggling – geopolitics, the growth/rates debate and, now, a fresh headline-driven reminder of an institutional risk premium,” said Ms Charu Chanana, a strategist from Saxo Markets in Singapore. 

Gold just emerged from a record-setting year, where almost every tailwind supporting the precious metal combined, from falling interest rates and heightened geopolitical tension to lower trust in the US dollar.

More than a dozen money managers said they had opted not to take too much money off the table, holding conviction in bullion’s long-term appeal. BLOOMBERG, REUTERS