By Chris Flood
The price of gold slipped back on Tuesday after surging to a fresh all-time high on Monday following the launch of an unprecedented criminal investigation into the head of the Federal Reserve, a dramatic escalation of the attacks led by President Donald Trump against the world’s most important central bank.
Trump has repeatedly threatened to fire Jerome Powell from his role as chair of the Federal Reserve and bitterly criticised the $2.5bn cost of the refurbishment of the Fed’s headquarters in Washington, a project that will now be investigated by the Department of Justice.
Powell, who is due to step down as Fed chair in May, hit back against the charges as another Trump-inspired political attack against the independence of the central bank which has resisted the President’s calls for aggressive cuts in US interest rates.
“The threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the President,” said Powell.
Gold traded just below the $4,600 an ounce during morning trading in London on Tuesday, already gaining more than 6% this year. The extraordinary ructions between Trump and the Fed are expected to fuel demand for gold which many investors regard as a haven during periods of elevated stress.
“All of the factors that helped to drive the record-breaking run for the gold price in 2025 – worries about the independence of the Fed, uncertainty about the outlook for US monetary policy, weakness in the US dollar and concerns about rising fiscal deficits in many countries – look likely to continue this year,” said John Reade, senior market strategist at the World Gold Council, the trade association representing gold mining companies.
Assets held in gold ETFs globally doubled in value last year to an all-time high of $559bn at the end of December, helped by record investor inflows worth $89bn and a 65% increase in the price of the precious metal, its strongest annual performance since 1979, according to the WGC.
Holdings in tonnage terms in gold ETFs reached a new historic peak of at 4,025.4 tonnes after rising by 801.2 tonnes during 2025. This represented the second strongest annual increase behind 2020 when holdings rose by 892.5 tonnes during coronavirus pandemic.
Gold ETFs are experiencing a “multi-year accumulation cycle, driven in part by the “uncertainty premium” created by the second Trump administration, according to Aakash Doshi, head of gold strategy, at State Street Investment Management.
Gold could reach the $5,000 an ounce level with elevated geopolitical tensions, concerns about high levels of government debt, worries about inflation pressures and fears about weakness in the US dollar providing support for the price of the precious metal, said Doshi.
“These trends are unlikely to reverse in 2026 and, collectively, point to a supportive backdrop for gold prices,” he said.
James Steel, HSBC’s veteran precious metals analyst, said he expected investor appetite for gold ETFs to remain positive during 2026 but demand might moderate later in the year. HSBC is forecasting that holdings in gold ETFs will grow by 504 tonnes this year, followed by a smaller increase of around 350 tonnes for 2027.
“While ETF demand may cool from 2025’s red hot levels, we still expect the combination of risks and needs for safe haven and portfolio diversification to sustain a high level of ETF purchases, thereby supporting gold prices,” wrote Steel in a research report published before news of the probe into the Fed.
Two significant new institutional investors in gold have caught the attention of WisdomTree, the US asset manager, which highlighted the arrival of Chinese insurance companies and Indian pension funds.
“Chinese insurance companies became eligible investors in 2025, with potential demand estimated at 244 tonnes. Indian pension funds, as of December 2025, are permitted to allocate up to 1% of assets to approved gold and silver exchange-traded funds. With [India] National Pension System assets exceeding $177bn, this implies potential allocations of up to $1.7bn. Even partial uptake would represent a meaningful new source of demand in an already tight gold market,” said Nitesh Shah, head of commodities and macroeconomic research at WisdomTree.
The pressure on the price of gold could also be affected by the rebalancing of the Bloomberg Commodities index which runs between January 9 and 15. Deutsche Bank estimated that BCOM rebalancing could result in gold sales of around 43.5 tonnes but the potential price impact is uncertain.
“The well-signalled nature of the rebalancing may mean that a meaningful portion of the flow may effectively be done in advance. If investors anticipate the rebalance, and cover positions as BCOM executes, this would mediate the price impact,” said Michael Hsueh, an analyst at Deutsche Bank in Singapore.
Originally published on ETF Stream.
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