Gold continued its upward trend on Wednesday, driven by escalating geopolitical tensions between the United States and the European Union. Brussels' decision to freeze trade negotiations with Washington boosted investor demand for safe-haven assets, although the precious metal later pared some of its gains during the session.
This market movement followed the European Parliament's approval of a freeze on the trade agreement with the United States. This freeze was a response to threats from US President Donald Trump to impose tariffs on European countries due to their opposition to Washington's efforts to control Greenland, a territory belonging to Denmark.
Although Trump ruled out the use of military force to achieve this objective in his remarks today, he emphasized during a speech at the Davos Economic Forum that the United States is the only entity capable of "protecting Greenland." This speech reignited European concerns about shifts in US policy toward its traditional allies.
Trump told participants at the forum in Switzerland: “Some people thought I was going to use force, but I don’t have to. I don’t want to use force, and I won’t use it.” This statement did little to allay market concerns and, in fact, heightened political uncertainty.
Gold at Record Highs
Amid these developments, the price of gold rose 1.44% to $4,832 per ounce during trading today, after earlier reaching $4,887.82, its highest price ever.
US gold futures for February delivery also climbed 1.5% to $4,837 per ounce at the time of this report, a clear indication of the continued upward momentum in the precious metals markets.
Fear of Missing Out Drives Investors
Commenting on this performance, Reuters quoted Bob Haberkorn, chief market strategist at RJO Futures, as saying that investors are experiencing a “fear of missing out,” adding:
“Given the global geopolitical situation, current conditions create an ideal environment for gold and silver prices to continue rising.”
This comes as US stocks saw a limited recovery following their biggest sell-off in three months, as investors digested Trump’s Davos speech, in which he criticized the European approach while ruling out the use of force to annex Greenland.
Monetary Policy Supports Gold
Meanwhile, investors are awaiting developments in the United States, where the US Supreme Court is expected to consider Trump’s controversial attempt to remove Lisa Koch, a Federal Reserve governor, in a case that could be a crucial test of the central bank’s independence.
In this climate, expectations suggest that the Federal Reserve will keep interest rates unchanged this quarter, and perhaps even until Chairman Jerome Powell's term ends in May. This is a factor that supports gold, as it is a non-yielding asset that typically benefits from low interest rate environments.
Silver Fluctuations and Platinum Gains
Meanwhile, spot silver fell 1.2% to $93.47 an ounce, after hitting a record high of $95.87 on Tuesday, driven by supply shortages and strong industrial demand.
Sonny Kumari, commodities strategist at ANZ Bank, believes that silver reaching triple-digit levels is "very likely given the current momentum," but she cautioned that this rally "may not be sustainable," anticipating price corrections and increased volatility.
Platinum also continued its rise, recording a 2.52% increase to reach $2,540.90 per ounce, after hitting a new record high of $2,511.80 earlier in the session, amid improved demand and declining supply.
