Key Points
- Gold and silver both hit new record highs on Monday.
- The rally is being driven by the escalating standoff between the U.S. and Europe over Greenland.
- President Trump has threatened new tariffs on eight European nations.
- A meltdown in Japanese government debt is also pushing investors into gold.
Gold prices soared past $4,700 an ounce to a new record high on Monday, and silver also hit an all-time peak, as a tense standoff between the United States and Europe over Greenland showed no signs of cooling down. The rally in precious metals is being fueled by a perfect storm of geopolitical uncertainty, a weakening dollar, and growing concerns about massive government debt.
The latest drama was sparked by President Trump’s threat to impose new tariffs on eight European nations that have opposed his ambitions to buy Greenland. The move has rattled markets and added fresh momentum to a record-breaking rally that has pushed gold prices nearly 75% higher over the past year.
“The Greenland episode has poured fresh fuel on a rally that has been building for months,” said one analyst.
Adding to the market’s unease, a meltdown in Japanese government debt has sent ripples through global bond markets. This has highlighted the mounting sovereign-debt problems in developed economies worldwide, pushing more investors into the safe haven of gold.
The world’s political and business leaders are gathering in Davos this week, where Trump is expected to discuss his plan for Greenland. French President Emmanuel Macron is pushing for the EU to take a hard line and activate its “anti-coercion instrument,” a powerful trade retaliation tool. However, German Chancellor Friedrich Merz is reportedly trying to get him to tone down his response.
While the rally in precious metals has been incredible, some investors are starting to get nervous. A recent Bank of America survey found that a majority of fund managers considered gold the “most crowded trade” and “overvalued.” For now, though, the momentum is clearly on the side of the bulls.
