Gold and silver surged to record highs on Monday as global equity markets mostly retreated after US President Donald Trump reignited trade war fears by threatening several European countries with tariffs over their opposition to a US takeover of Greenland.
Trump has fuelled rising geopolitical tensions in recent weeks by insisting that Washington must take control of the strategically located North Atlantic island, citing national security concerns. After talks failed to resolve what he described as a “fundamental disagreement” over the Danish autonomous territory, the US president escalated the standoff over the weekend.
On Saturday, Trump announced plans to impose new tariffs on eight European nations for refusing to support the proposed takeover. He said levies of 10 per cent would be imposed on Denmark, Norway, Sweden, France, Germany, the United Kingdom, the Netherlands and Finland from February 1, rising to 25 per cent from June 1 if the countries did not comply.
The announcement drew an immediate backlash, with the affected countries issuing a joint statement warning that “tariff threats undermine transatlantic relations and risk a dangerous downward spiral.”
The move also cast doubt over a trade agreement signed between the United States and the European Union last year. German Foreign Minister Johann Wadephul told ARD television that he did not believe the deal could survive “in the current situation.”
Meanwhile, aides to French President Emmanuel Macron said France would push the European Union to activate its never-before-used “anti-coercion instrument” should Washington follow through on the tariff threat. The measure allows the EU to restrict imports of goods and services into its 27-member bloc of around 450 million people.
Bloomberg reported that EU member states were already discussing possible retaliatory tariffs on up to €93 billion ($108 billion) worth of US goods.
The growing prospect of a transatlantic trade war rattled financial markets, driving investors toward safe-haven assets. The rally built on gains sparked last week by Trump’s threats against Iran and the US-backed ouster of Venezuelan President Nicolas Maduro.
Gold climbed to a record $4,690.59 an ounce, while silver also hit a fresh peak of $94.12.
Equity markets across much of Asia retreated, with losses in Tokyo, Hong Kong, Shanghai, Sydney, Singapore and Wellington. Seoul and Taipei bucked the trend with modest gains. European and US futures were also sharply lower.
The US dollar weakened against major peers, with the euro, sterling and yen all advancing.
“The next signpost is whether this moves from rhetoric to policy, and that’s why the concrete dates matter,” said Charu Chanana, chief investment strategist at Saxo Markets.
“On the European side, the decision path is as important as the headline. There is a difference between signalling with the anti-coercion instrument and formally deploying it,” she said, warning that even if the immediate tariff threat is softened, the longer-term risk of trade fragmentation remains high.
Markets showed little reaction to data indicating China’s economy grew five per cent last year, in line with official targets, though growth slowed sharply in the final quarter.
Investors in Seoul and Taipei also shrugged off comments from US Commerce Secretary Howard Lutnick, who warned that South Korean and Taiwanese chipmakers could face tariffs of up to 100 per cent if they fail to expand production in the United States.
Key figures at around 0230 GMT
- Tokyo – Nikkei 225: Down 1.0% at 53,412.88
- Hong Kong – Hang Seng Index: Down 0.7% at 26,670.01
- Shanghai – Composite: Down 0.1% at 4,099.23
- Euro/dollar: Up at $1.1628
- Pound/dollar: Up at $1.3397
- Dollar/yen: Down at 157.54 yen
- Euro/pound: Up at 86.79 pence
- WTI crude: Up 0.1% at $59.52 per barrel
- Brent crude: Flat at $64.15 per barrel
- New York – Dow Jones: Down 0.2% at 49,359.33 (close)
- London – FTSE 100: Flat at 10,235.29 (close)
AFP
