Gold and silver jump to record highs on Greenland tariff threats

Gold recorded its best annual performance since 1979 last year, while silver’s rally has been even greater, with prices tripling over the past year. Photo by YASSER AL-ZAYYAT/AFP via Getty Images/Postmedia files

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Spot gold rose as much as 2.1 per cent to near US$4,700 an ounce, while silver surged as much as 4.4 per cent as Trump’s aggression weighed on the dollar and buoyed demand for havens. The U.S. will slap tariffs on eight European nations — including France, Germany and the United Kingdom — that oppose the plan to acquire Greenland.

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Worries over the fallout from Trump’s bid to annex Greenland has added renewed impetus to a record-breaking rally that lifted gold prices about 70 per cent over the past 12 months. Investors piled into the trade in recent weeks amid heightened geopolitical tensions and a renewed attacks on the Federal Reserve’s independence.

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The U.S.’s 10 per cent levies will kick in on Feb. 1 and rise to 25 per cent in June. European leaders are discussing several options for how to respond, including retaliatory levies on €93 billion (US$108 billion) of U.S. goods, people familiar with the talks said.

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“We are constantly experiencing new provocations, we are constantly experiencing new antagonism, which President Trump is seeking, and here we Europeans must make it clear that the limit has been reached,” German Finance Minister Lars Klingbeil said Monday in Berlin.

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The U.S.’s tariff threats over Greenland are “reminiscent of a mafia extortion racket,” said Peter Mallin-Jones, an analyst at Peel Hunt LLP. “The precious metal impact looks a reaction to a move away from U.S. dollar assets and the potential inflationary impact of a trade war between the U.S. and EU, let alone a chilling effect on economic activity.”

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Gold recorded its best annual performance since 1979 last year, supported by falling U.S. interest rates, continued central bank buying and ructions to the geopolitical landscape brought about by Washington. Silver’s rally has been even greater, with prices tripling over the past year.

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A broader rotation into the metals complex, led by investors in China, has further supported the rallies in gold and silver. Exchange-traded funds’ gold holdings jumped by more than 28 tons last week, the biggest increase since September, and have expanded in seven of the last eight weeks.

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Many analysts expect the stunning gains to continue, with Citigroup Inc. last week forecasting that gold would reach US$5,000 within three months, and that silver would get to US$100 an ounce.

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Spot gold climbed 1.7 per cent to US$4,671.97 an ounce as of 12:42 p.m. in London, and earlier hit a peak of US$4,690.59. Silver was up 3.5 per cent at US$93.30, and earlier touched US$94.1213. Platinum and palladium rose. The Bloomberg Dollar Spot Index declined 0.2 per cent.

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The Trump administration recently renewed attacks on the Fed, prompting a surge in gold and silver prices as worries grew over the institution’s continued ability to rein-in inflation, free from political pressure.

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Investors will be keeping close tabs on the U.S. Supreme Court’s argument on Trump’s effort to fire Fed Governor Lisa Cook, which is due on Wednesday and could be pivotal for the central bank’s continued independence.

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