A gloomy start to the week for European stock markets turned into a banner day for precious metals. Following the US threat to impose tariffs on eight European countries over the Greenland dispute, stock indices across the continent fell. In stark contrast, gold and silver prices soared to new records as investors sought shelter from the gathering economic storm.
Major European indices dropped between 1% and 2%, with losses led by the automotive sector. Giants in the car industry took significant hits as the market digested the potential for higher export costs. Meanwhile, gold climbed 1.6% to $4,671 an ounce, and silver reached a record $94.08. The divergence between falling stocks and rising metals highlights the defensive positioning of global investors.
The threatened tariffs are substantial: a 10% levy on all goods from the targeted nations starting February 1, rising to 25% by June. The countries in the crosshairs include some of Europe’s largest economies. This broad sweep has raised fears of a significant disruption to transatlantic trade flows and has forced companies to re-evaluate their annual guidance.
Economic forecasters are rushing to adjust their models. Some predict that the UK could lose a significant portion of its GDP growth, potentially tipping it toward recession. The Eurozone could also see its growth shaved. There is also the logistical puzzle of enforcement, as open borders within Europe could complicate the US strategy to target specific nations.
Despite potential loopholes, the political ramifications are severe. The move represents a significant escalation in tensions, and European officials are already planning retaliation. With US markets set to reopen after a holiday, volatility is expected to continue, likely keeping gold and silver prices elevated as traders navigate this unpredictable landscape.
