Markets are bracing for a new trade war after the US threatened tariffs on European allies over the Greenland issue. While investors have often relied on the hope that such threats will be walked back, the mood this time is more pessimistic. Amidst this anxiety, gold and silver have defied gravity, breaking through to new all-time highs as the primary refuge for nervous capital.
Gold rose to $4,671 an ounce, and silver jumped over 3% to settle at $93.15, having peaked even higher earlier in the day. The strength in these metals correlates directly with the weakness in European stocks, where major indices posted significant losses. The dollar also softened, providing further support for dollar-denominated commodities like gold and silver.
The threat involves a tiered tariff structure on eight countries, starting at 10% and potentially rising to 25%. This has hammered the European automotive sector, with leading manufacturers seeing their shares drop. The concern is not just the tariffs themselves, but the erratic nature of the policy, which links economic levies to territorial acquisition—a move that has few precedents.
Economists caution that standard negotiation tactics may not apply here. The sovereignty of Greenland is a rigid issue, making a compromise difficult. This suggests that the February 1 tariffs are likely to be implemented, dragging down European GDP. The potential for a prolonged dispute is high, which is a negative signal for global growth.
However, the structure of the European Union may offer some mitigation. Experts note that goods could potentially be rerouted through non-targeted nations to avoid the levies. While this might reduce the long-term economic damage, it does little to cure the immediate uncertainty that is driving investors toward the safety of gold and silver.