Gold prices hit record highs in 2025, surpassing $4,500 for the first time. The precious metal is on track for a 65% annual gain, the strongest since 1979. Market commentators draw parallels between the late 1970s and today, citing geopolitical uncertainty and a weakening dollar as key factors.

In 1980, the Federal Reserve raised short-term interest rates to 20%, causing gold prices to plummet. Today, the Fed is cutting rates amidst signs of a weak labor market. Expectations for further rate cuts in 2026 persist, with concerns about the U.S. economy and potential interference in Fed policy-making.

Market distortions and higher long-term borrowing costs loom as the Fed’s independence may become compromised. Analysts warn that uncertainty surrounding the announcement of Fed Chair Powell’s successor could impact long-term rates, potentially undermining efforts to lower borrowing costs by the Trump administration. Higher long-term Treasury yields compete with gold as an investment, but experts from CPM Group suggest that reduced faith in the U.S. central bank’s independence could support gold and silver investment demand. Economist Eric Winograd warns of potential inflation if central banks succumb to political pressure, similar to the 1970s scenario. If the Fed’s independence is threatened in 2026, the dollar could lose purchasing power, leading investors to seek alternative assets like gold and cryptocurrencies. The economic and policy parallels are closer to the early 1970s than 1979, indicating a potential shift in gold and silver investments.

Read more at Yahoo Finance: Gold is pricing in something the Fed won’t say out loud