Gold Soars and Stocks Stumble as Trump Threatens Europe with Greenland Tariffs
Quick Summary
Investors flocked to precious metals for safety following US President Donald Trump's threat to impose new tariffs on eight European nations over a resisted proposal to purchase Greenland, causing gold and silver to hit record highs of $4,689.39 and $94.08 an ounce, respectively. The proposed 10% tariff, set for February 1st and potentially rising to 25%, targets Denmark, Norway, Sweden, France, Germany, the UK, the Netherlands, and Finland, prompting the EU to consider a €93bn retaliatory package. This conflict has intensified a year-long rally in gold, already up over 60% due to global tensions and central bank buying, while silver has been boosted by Chinese export restrictions. While precious metals soared, European stock markets tumbled, with London's FTSE 100, Germany's Dax, and France's Cac 40 all experiencing significant drops that particularly affected automotive and luxury brands, although gold miners and defense stocks saw gains. Market participants are now awaiting a US Supreme Court ruling on the legality of Trump's tariffs, a decision that could introduce further volatility and underscores the IMF's recent warning that escalating trade disputes pose a significant risk to the global economy.
Investors piled into precious metals for safety on Monday, sending gold and silver to record highs while stock markets took a hit. The shake-up was a direct reaction to US President Donald Trump’s...
Investors piled into precious metals for safety on Monday, sending gold and silver to record highs while stock markets took a hit. The shake-up was a direct reaction to US President Donald Trump’s threat to slap new tariffs on eight European nations that have resisted his proposal to purchase Greenland.
Gold prices jumped to $4,689.39 (£3,499) an ounce, and silver wasn’t far behind, hitting a peak of $94.08 an ounce. Both are classic safe-haven assets that investors flock to when things get rocky, and their value has been climbing steadily over the past year. Meanwhile, the mood on European stock exchanges was grim as traders worried about the escalating friction.
The move didn’t come out of nowhere. On Saturday, Trump announced that a 10% tariff on goods from Denmark, Norway, Sweden, France, Germany, the UK, the Netherlands, and Finland would kick in on February 1st. He also warned that the rate could jump to 25% and would remain in place until a deal over Greenland was reached. Now, reports suggest the EU is considering hitting back with its own €93bn (£80bn) tariff package against US imports.
This ongoing spat over Greenland has only fueled the rally in gold and silver. Gold's value has already soared by over 60% in the past year, a climb driven by a mix of global tensions, expectations of more interest rate cuts, and heavy buying from central banks. For silver, its price has also gotten a boost from China's decision to restrict its exports.
"Gold has hit fresh record highs on its glittering run upwards," said Susannah Streeter, chief investment strategist at Wealth Club. "The precious metal is holding even more allure as a safe haven as worries spread about the repercussions of the US aggressive trade and geopolitical policies."
While precious metals enjoyed their moment in the sun, it was a different story for stocks. In London, the FTSE 100 index slipped by nearly 0.4%, and the more UK-focused FTSE 250 dropped 0.9%. Shares in financial and industrial companies fell, though gold miners like Fresnillo and Endeavour bucked the trend, rising along with the price of their product.
The pain was even worse across the channel. Germany's Dax index fell 1.3%, with automakers like BMW, Mercedes-Benz, and VW all shedding 2-3% of their value. In France, the Cac 40 was down 1.8%, which hurt luxury giants LVMH and Hermes. It wasn't all bad news, however. European defense stocks, including Germany's Rheinmetall and France's Thales, actually traded higher.
US markets were closed for a public holiday. "Fears that a hard-fought trade deal between Europe and the US might now be off the cards contributed to significant falls across European indices," said Danni Hewson, head of financial analysis at AJ Bell.
All eyes are now on the US Supreme Court, which is expected to rule on whether President Trump has the authority to impose these tariffs under the International Emergency Economic Powers Act. A decision could come as soon as Tuesday. Hewson warned that if the court strikes down Trump's tariffs, it "could bring another huge upset."
This latest flare-up is a stark reminder of the risks that trade tensions pose to the world economy, a point the International Monetary Fund (IMF) highlighted recently. In a report prepared before this latest threat, the IMF described the global economy as "steady" but warned that an end to the AI boom or a spike in trade disputes could easily derail growth.