Gold and silver futures edged higher on Friday following news that the U.S. Department of Justice dropped its criminal investigation of outgoing Fed Chair Jerome Powell, paving the way for Kevin Warsh to step in as Powell's successor, which in turn has sparked some optimism for lower interest rates sooner than later.
Senator Tillis, a Republican and Banking Committee member, had effectively prevented the full Senate from voting to confirm Warsh as Fed chair unless the investigation ended.
U.S. Attorney Jeanine Pirro, the top federal prosecutor for the District of Columbia, said the Federal Reserve's inspector general was asked to investigate cost overruns in the multibillion-dollar renovation of the Fed's headquarters in Washington.
Powell and others had said that the real reason for the DoJ probe was to pressure him and the Fed to lower interest rates as President Trump wanted.
Last summer, Trump sought to fire Fed Governor Lisa Cook, who, like Powell, had resisted his demands to cut rates.
Gold prices fell for the full week as stalled talks between the U.S. and Iran lifted oil prices, raising fears of inflation and expectations that central banks would keep interest rates higher for longer.
Benchmark 10-year U.S. Treasury yields jumped 1.5% this week, raising the opportunity cost of holding gold, while the dollar posted its first weekly gain in three, making bullion more expensive for holders of other currencies.
"The longer the Strait [of Hormuz] remains shut, the greater the oil shock and the more distant the idea of Brent crude trading back to levels near $80 or below," ING analysts said in a note. "This view is very much dominant in the interest rate market, where short-dated yields remain very firm on the view that many central banks will have to react to this inflationary shock."
Front-month Comex gold (XAUUSD:CUR) for April delivery closed up 0.4% to $4,722.30/oz, and front-month Comex silver (XAGUSD:CUR) for April delivery gained 1.2% to $76.383/oz.
For the full week, gold and silver fell 2.8% and 5.5%, respectively.
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