1. The Federal Reserve Change: From "Whether to Change" to "How to Change" Deep Strategic Game

1.1 Timeline and Key Developments

The replacement of the Federal Reserve Chair has entered a substantive countdown phase:

· Powell’s term: set to expire in May 2026, but his term as a Fed Board member will continue until January 31, 2028.
· Trump’s nomination: formally nominated Kevin Woehner, a current Fed Board member, as the next Chair on January 30, 2026; Senate confirmation hearings are expected to commence soon.
· Temporary transition mechanism: Powell has stated that if the new Chair nomination is not confirmed in time, he will serve as interim Chair according to regulations until the confirmation is completed.

1.2 Who is Woehner? Policy Roadmap

Woehner’s "resume puzzle" is quite unique: a visiting scholar at Stanford University, he joined the Federal Reserve Board in 2006 at the then-youngest age, spanning periods of credit boom, the 2008 financial crisis, and early post-crisis recovery. Before the nomination, Trump considered four candidates—Woehner, White House economic advisor Hasset, current Board member Waller, and BlackRock executive Rieder—Woehner ultimately prevailed.

His policy stance can be understood through three tensions:

"Hawkish background + Dovish signals": Woehner was known for hawkish views during his tenure, opposing quantitative easing, advocating rapid balance sheet reduction, but in recent years has publicly supported rate cuts, stating "not cutting rates is the biggest threat to the Fed’s credibility."

"Balance sheet reduction + Rate cuts" in parallel: Woehner advocates shrinking the balance sheet to absorb excess liquidity, creating room for rate cuts—estimated that reducing about $1 trillion in assets roughly equates to a 50 basis point rate cut.

Redefining independence: Woehner’s core idea is not to "abolish independence" but to "rewrite the boundaries of independence," believing the Fed should not overreach in regulation and social issues, and should refocus on price stability and maximum employment.

1.3 Powell’s "Reluctance to Leave" Subtle Dilemma

In March 2026, Powell publicly stated he has no intention to leave before the Justice Department’s investigation into the Fed concludes, adding uncertainty to the transition. The White House is currently highly confident that Woehner will take office in May, but any delays in judicial procedures could prolong the current policy stance’s waiting period, which is critical for market rate expectations.

---

2. The Market’s "Vote": Two Phases of Intense Volatility

2.1 First Phase: Woehner’s Nomination Sparks Market Repricing (Late January to Early February)

After the nomination announcement on January 30, 2026, the market quickly underwent a sharp revaluation:

· Gold was near a historic high of around $5,600/oz; within 48 hours, it plummeted nearly 15%, the largest single-day drop in 40 years; spot silver briefly fell from $120 to below $85.
· The dollar index rose 0.84% in a single day, the largest increase since May 2025, continuing a five-day rally.
· The core driver was the market’s perception that the Fed would be subjected to political pressure, breaking the "currency devaluation trade" signaled by Woehner’s hawkish stance, restoring dollar confidence and quickly eroding the previous gold premium.

2.2 Second Phase: Price Logic Shift Amid Geopolitical Conflict (February to April)

From February onward, the US-Iran geopolitical conflict erupted, causing a threefold shift in gold’s pricing logic, with increased complexity:

· Late Feb to March: Initial risk aversion drove gold higher, with markets trading around inflation risks and geopolitical premiums. But as gold surged (approaching the historic peak of $5,600 and then sharply retreating, with a maximum retracement of 24%), profit-taking and deleveraging pressures intensified.
· Early April to now: Gold’s pricing logic shifted from "pure safe haven" to a resonance of "geopolitical escalation, dollar index strength, and shrinking rate cut expectations"—gold prices fell below $4,700, with a cumulative decline of over 10% since the Middle East conflict began.

---

3. Current Core Strategic Framework for Gold: Tug-of-War Among Three Forces

The current gold price trend reflects a complex game among geopolitical risks, inflation expectations, and Fed policy paths:

3.1 Geopolitics: "Ceasefire" Has Not Substantively Eased the Crisis

On April 7, Trump announced acceptance of Pakistan’s mediation, agreeing to a two-week ceasefire with Iran, contingent on Iran opening the Strait of Hormuz. However:

· Bloomberg pointed out that no concrete agreement was reached; core disputes remain unresolved—Trump’s pre-attack goals of "destroying Iran’s nuclear program" and "regime change" were not achieved, and Iran gained more leverage on the Strait issue.
· Iran’s ten-point plan, covering sanctions relief, compensation demands, and US military withdrawal from the Middle East, differs significantly from the US "15-point plan"—more akin to a long-term peace framework than a temporary ceasefire.
· The weekend negotiations on April 14 ended without agreement; gold initially dropped over 2%, then rebounded after market digestion of negative news, closing slightly down by 0.2%. This clearly indicates the market is highly sensitive to a "tough talk and negotiations" mode—any breakdown could trigger a rapid gold price reaction.

The threat to the Strait of Hormuz, which accounts for about 20% of global oil and gas exports, has pushed Brent crude to $90 per barrel. After the ceasefire announcement, oil prices briefly plunged 11%, but the real issue is whether the Strait can be truly reopened. The long-term trend of oil prices will directly influence inflation expectations’ strength and sustainability.

3.2 Inflation and Stagflation Risks: "Inflation" Priced In, "Stagflation" Not Yet

Market pricing for inflation is relatively full, but stagflation risk remains underpriced:

· The US one-year inflation swap rate has risen to 3.168%, indicating market expectations of future CPI increases remain high.
· Guosheng Securities’ analysis is noteworthy: the market has priced in "inflation" sufficiently, but not "stagflation." If oil prices rise further, markets will gradually price in stagflation or recession risks, leading to a weakening dollar index and US stocks, and a potential rebound in gold—this round’s maximum 24% retracement is seen as a "bullish consolidation" rather than a bear market end.
· The current gold price of about $4,818/oz still raises the question: does it fully reflect extreme scenarios of geopolitical risk and inflation paths? This remains the biggest divergence in market views.

3.3 Fed Policy: The Sharp Shrinking of Rate Cut Expectations Is the Main Downward Pressure

Swap market data shows that market bets on a rate cut before year-end have dropped to about 29%, a significant decline from previous levels. This is one of the main reasons for the recent gold correction—high interest rates directly suppress zero-yield gold, and the waning rate cut expectations reduce the opportunity cost of holding gold.

Meanwhile, Treasury Secretary Bessant (whose "early July tariff reinstatement" statement aligns closely with the provided newsflash) is openly pressuring the Fed, claiming it "has been wrong on inflation," and that waiting for clearer data would mean "more rate cuts." This tension between the White House and the Fed—not full coordination—is a core source of current market uncertainty.

---

4. An Important Uncertainty: Leadership Change Is Not the Only Variable

Woehner’s ultimate trajectory intersects critically with the pace of Trump’s fiscal policies:

1. Confirmation process uncertainty: the Senate Banking Committee has yet to schedule confirmation hearings, partly due to Woehner’s complex financial asset review; if delayed past Powell’s term, Powell may serve as interim Chair per regulations.
2. Tariff policy path: Bessant is seeking to rebuild a "tariff wall" via Section 301 of the Trade Act of 1974; the Supreme Court previously ruled that Trump’s emergency tariffs were unconstitutional—indicating a shift in the institutional tools for tariff policy.
3. Fed independence game: historical data shows that after leadership changes, gold typically performs well within 6 to 24 months; policy uncertainty itself is a key support for gold—more than just dovish policies.

---

Comprehensive Outlook

Currently, the gold market is embroiled in a complex game among three forces: geopolitical risks (ceasefire and oil markets), inflation trajectories, and Fed policy paths:

· Short-term: any turbulence in the Middle East—be it negotiation breakdowns or extended ceasefires—could trigger sharp, two-way gold swings. The shrinking rate cut expectations are a core downward force, but inflation hedging demand provides a solid bottom support.
· Medium-term: once Woehner is officially appointed and advances a "balance sheet reduction + rate cut" parallel strategy, markets will need to reassess the interplay between dollar confidence and policy rate paths, which will be crucial for gold trends. Historical experience shows that leadership change uncertainty itself is a significant support for gold.
· Long-term: the oil-dollar system under geopolitical shocks, central bank gold purchases, and structural flaws in dollar confidence suggest that the long-term bull case for gold remains fundamentally intact.

Risk Warning: The above analysis is a synthesis of market information and institutional views and does not constitute investment advice. Gold markets are affected by multiple uncertainties, with high short-term volatility risks. Investors should make decisions prudently according to their risk tolerance.