Spot gold punched through $5,500 per ounce in Asian trading on January 29, briefly testing $5,600 after a blistering weekly gain of more than $500. The move accelerated after the Federal Reserve’s January policy decision, when the FOMC held the target range at 3.50–3.75% in a 10–2 vote, but markets read a different story — one of a looming dovish pivot and widened political risk around the Fed’s independence.
Investors rapidly re-priced the path of US policy, betting that meaningful cuts will arrive in 2026 and that the first easing will become more probable later in the year. That shift, combined with renewed geopolitical tensions and concerns that legal or political pressure on Fed officials could erode the central bank’s autonomy, sent safe-haven flows into bullion and pushed real yields lower — a classic tailwind for gold.
Macro and strategy desks at Bloomberg, Oxford Economics and BCA Research say the rally rests on three broad pillars: persistent structural demand (especially central-bank buying), a global “currency debasement” narrative and the urgent policy preference to suppress real interest rates. BCA’s Arthur Budaghyan frames the story bluntly: US policy levers are being used in ways that amount to deliberate real-rate compression, which in turn makes gold a more attractive store of value for both institutions and retail investors.
Technical dynamics have amplified the move. Market participants flagged a possible “gamma squeeze” in options markets, where sellers of short-dated, low-strike calls are forced to buy futures to hedge as prices surge — a feedback loop that can drive rapid price moves in otherwise thin trading sessions. ETF inflows and renewed retail appetite have added to liquidity-driven volatility, even as long-term structural buyers such as central banks continue to accumulate metal.
Central-bank buying is a particularly important underpin. Oxford Economics projects that demand from official reserves and higher ETF holdings will supply a firm floor under prices even if speculative activity raises short-term swings. Deutsche Bank and Goldman Sachs have already adjusted forecasts upward: Goldman lifted its year-end target to $5,400, while Deutsche warned that a softening dollar could lift prices toward $6,000 an ounce.
Political developments in the United States are also in play. Market betting on potential successors to Jerome Powell — with BlackRock’s Rick Rieder and former Fed governor Kevin Warsh featuring in prediction-market odds — has reinforced expectations for a softer future stance. Two dissenters at the January FOMC, including Christopher Waller and Cleveland Fed President Loretta Mester, urged a 25bp cut, a sign that debate within the Fed is shifting and that market-implied easing may be closer than official guidance suggests.
What this means for investors and policymakers is a more complex risk landscape. For portfolio managers, gold’s low long-term correlation with equities and bonds reasserts its insurance value even as the asset becomes more volatile. For the United States, the episode underscores the political sensitivity of central-bank decisions: perceived interference or legal threats to Fed independence would not only raise domestic policy risk but could accelerate reserve diversification away from the dollar.
Volatility and policy uncertainty will likely remain the dominant features of the gold market through 2026. Watch real yields, US fiscal developments and the pace of official reserve diversification — any further erosion of expected real returns in dollar assets, or fresh geopolitical shocks, will keep bullion in demand, while a durable pickup in growth or a sustained rise in real yields could trigger sharp corrections.