Key Points
- Chair Jerome Powell said on Sunday that the Justice Department has opened a criminal investigation against him for allegedly misleading Congress about a building renovation project at the Federal Reserve’s headquarters.
- Precious metals demand spiked in an investor flight to safety.
Jan 12 (Reuters) – The past three heads of the U.S. Federal Reserve on Monday joined with other former federal government economic policy leaders in condemning the Trump administration’s criminal probe of Fed Chair Jerome Powell, likening it to the interference with central bank independence more often seen in emerging market countries with “weak institutions.”
“The reported criminal inquiry into Federal Reserve Chair Jay Powell is an unprecedented attempt to use prosecutorial attacks to undermine that independence,” a statement signed by former Fed chairs Janet Yellen, Ben Bernanke and Alan Greenspan said. “This is how monetary policy is made in emerging markets with weak institutions, with highly negative consequences for inflation and the functioning of their economies more broadly. It has no place in the United States whose greatest strength is the rule of law, which is at the foundation of our economic success.”
The three were joined by 10 other former top economic policymakers appointed by both Republican and Democratic presidents.
The statement came after Powell issued an extraordinary video statement on Sunday, saying that President Donald Trump’s Justice Department had opened a criminal inquiry into comments he made to Congress last summer over ongoing building renovations at the Fed’s headquarters complex in Washington.
The announcement sparked an investor flight to safety, with gold breaking resistance at $4,500 per ounce, signaling a fresh advance. Expect retracement to test the new support level, but respect will likely confirm our medium-term target of $5,000.
Silver broke through the $ 80-per-ounce resistance level, setting a short-term target of $90. We expect retracement to test the new support level, but respect will likely confirm our medium-term target of $100.
Platinum broke resistance at $2,200 per ounce and is retracing to test the new support level. Respect would confirm our medium-term target of $2,700.
Energy Metals
Sprott Uranium Miners ETF (URNM) is testing resistance at 65, with rising Trend Index troughs indicating buying pressure. A breakout would signal a fresh advance with a medium-term target of $80.
Sprott Copper Miners ETF (COPP) is in a strong uptrend after breaking out of the consolidation around 30. Rising Trend Index troughs and a value of 1.27 indicate strong buying pressure.
Sprott Lithium Miners ETF (LITP) is in an even stronger uptrend, with rising Trend Index troughs reaching 2.2.
Conclusion
The DOJ criminal investigation of Fed Chair Jerome Powell is an unprecedented assault on the Fed’s independence. It will likely undermine US Treasuries, sending long-term yields sky-high and sharply impacting stock prices.
The immediate impact has been a flight to safety, driving up demand for precious metals. Our medium-term target of $5,000 per ounce for gold will likely be confirmed if the precious metal respects its new support level at $4,500.
Respect of support for silver at $80 per ounce would confirm our target of $100. Respect of platinum support at $2,200 per ounce would confirm a medium-term target of $2,700.
Energy metals also enjoy strong demand, with copper and lithium in strong uptrends. Uranium is testing resistance, and a breakout would signal a fresh advance.
A few months ago, someone asked if gold would reach $10,000. I replied, “I can guarantee you that gold will reach $10,000. I’m just not sure how long it will take.”
Acknowledgments
- Reuters: Donald Trump versus the Federal Reserve – what you need to know
- Reuters: Past three Fed chairs decry ‘unprecedented’ assault by Trump on Powell
Colin Twiggs is a former investment banker with almost 40 years of experience in financial markets. He co-founded Incredible Charts and writes the popular Trading Diary and Patient Investor newsletters.
Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.
Focusing on interest rates and financial market liquidity as primary drivers of the economic cycle, he warned of the 2008/2009 and 2020 bear markets well ahead of actual events.
He founded PVT Capital (AFSL No. 546090) in May 2023, which offers investment strategy and advice to wholesale clients.