Political Strife Engulfs the Federal Reserve: US Dollar and Treasury Bonds "Decouple," Gold Breaks $4,600—What’s Next for the Dollar, Treasuries, and Gold?

Huitong Network, January 12—— On Monday (January 12), the global financial market experienced a day of violent volatility. The US Dollar Index dropped significantly, while spot gold, driven by multiple risk-averse factors, historically broke above $4,600 per ounce. The Federal Reserve Chair's tough stance on administrative intervention directly shook market confidence in the stability of the US institutional system, triggering a series of chain reactions.

On Monday (January 12), the global financial market saw a day of sharp fluctuations at the beginning of 2026. The US Dollar Index fell significantly, and spot gold, driven by multiple risk-averse factors, historically broke through $4,600 per ounce.

The fundamental driving force behind this market move is not a single economic data point, but rather a rare public clash between US politics and the independence of monetary policy. The Federal Reserve Chair's tough remarks on administrative intervention directly undermined market confidence in the stability of the US institutional system, leading to a series of chain reactions.

Controversy Over Fed Independence Hits US Treasuries, Dollar's Credit Foundation Questioned

The US dollar's trend showed a critical divergence: the 10-year US Treasury yield, which usually supports the dollar, rose, but the dollar itself fell. The core of this abnormal phenomenon lies in .

Retail traders generally believe that the executive branch is attempting to influence interest rate decisions through abnormal means, undermining the Fed's independence. Institutional interpretations point out that this essentially forces investors to re-evaluate the "political risk premium" of US assets. Judging by the bond market, long-term Treasury yields have surged while short-term yields remain relatively stable. This "bear steepening" of the curve is not driven by growth expectations, but by the market demanding compensation for possible long-term inflation risks and governance uncertainties.

When the market fears that monetary policy may be distorted by political factors, the credit foundation of the US dollar as the global reserve currency is eroded. Technical charts show that the US Dollar Index has fallen below key moving average support; if it cannot recover quickly in the short term, downward pressure may persist. The upcoming Supreme Court ruling this week may further impact the fiscal outlook and exacerbate market anxiety.

Bond Market Trust Crisis Spreads, Gold Breaks $4,600 as Logic Deepens

The strong rally in gold can no longer be explained solely by geopolitical conflicts. Its deeper logic lies in becoming a hedge against "US monetary policy framework risk."

Normally, rising Treasury yields would suppress gold. But when Treasuries themselves seem "less reliable" due to domestic political disputes, gold's attribute as the ultimate credit substitute is fully revealed. Institutional analysis suggests that the current capital inflow into gold is not only a hedge against known geopolitical risks, but also a precautionary move to guard against possible chaos in US macro policy-making.

Recently, a series of geopolitical events from Europe to Latin America, coupled with US domestic policy disputes, have collectively reinforced market doubts about the stability of the current international order. This macro uncertainty continues to provide a catalyst for gold.

Technical indicators show strong bullish momentum for gold, with short-term overbought risks possible, but fundamental support remains solid. Global gold ETF inflows and continuous central bank buying provide a long-term and solid foundation for gold prices.

Short-Term Outlook and Key Ranges for Major Instruments

Based on current market logic, the following ranges should be monitored for core instruments over the next 2-3 days:


Core logic: Dragged down by domestic political-monetary policy conflicts, currently in a phase of credit downgrade.
Resistance range: 98.86 - 99.21. Whether it can recover 98.86 is key.
Support range: 98.35 - 98.51. If lost, further downside is possible.
Focus: Supreme Court ruling developments and the executive branch's subsequent response.



Core logic: Yields remain high due to rising term premium and political risk compensation.
Resistance range: 4.20% - 4.24%.
Support range: 4.14% - 4.17%.
Focus: Demand for long-term Treasury auctions and changes in fiscal deficit expectations.



Core logic: Dual drivers of institutional trust crisis and geopolitical risks.
Resistance range: $4,600 - $4,615. After breaking the psychological threshold, beware of profit-taking.
Support range: $4,487 - $4,520. Above $4,500, the bullish pattern is maintained.
Focus: Whether geopolitical tensions escalate, and whether risk-averse sentiment further spreads.

Trend Outlook: A Shift in Market Logic

Looking ahead to the next few days, the market focus has shifted from economic data itself to the stability of the institutional framework that shapes economic policy. The Supreme Court's ruling may become the next key node. If the outcome intensifies concerns over fiscal sustainability, it could drive long-term Treasury yields even higher, further benefiting gold through the "risk aversion-credit substitution" chain, while putting pressure on the dollar.

Meanwhile, how the Federal Reserve responds to political pressure will determine the bottom line of dollar credit. In the short term, the market may continue to digest the uncertainty brought by this turmoil; the dollar may remain weak and volatile, while gold, after breaking key levels, will stand out even more as a "non-political" reserve asset.

Overall, the market is in a transitional period where traditional pricing anchors are being challenged. The "institutional risk premium" bred in the Treasury market is being transmitted to the currency and precious metals markets, reshaping valuations. At this stage, understanding the path of risk transmission is more important than chasing price volatility.