Following a surge to new record highs driven by geopolitical tensions, gold and silver prices are currently stabilizing near their historical peaks. Gold had climbed to $4,694 per ounce, while silver briefly touched a record high of $94.7295 per ounce. The move by former US President Trump to attempt a takeover of Greenland has sparked concerns about a potential trade war between the US and Europe. Markets continue to await a concrete response from European authorities.
Threats from the US towards its NATO allies have triggered market turbulence, boosting demand for safe-haven assets and reviving the "sell America" trade. French President Macron intends to request the activation of the EU's anti-coercion mechanism, although German Chancellor Merz has indicated he is attempting to persuade Macron to moderate his response.
From the market's perspective, the Greenland incident has injected fresh momentum into the precious metals rally that has been ongoing for months. Since last year, increasingly volatile macroeconomic and geopolitical conditions have unsettled investors reliant solely on financial assets, with precious metal prices already in a sharp uptrend, making new highs. As tariff concerns loom over markets, exacerbating worries about Washington's long-term fiscal health, US Treasury bonds have joined the global bond sell-off, further benefiting precious metal prices.
Furthermore, investors will closely monitor the US Supreme Court's debate, scheduled for Wednesday, regarding Trump's attempt to dismiss Federal Reserve Governor Lisa Cook. This debate could be crucial for the Fed's ability to maintain its independence. Additionally, with Kevin Hassett potentially remaining at the White House, media reports citing informed sources suggest that Rick Rieder, BlackRock's Chief Investment Officer of Global Fixed Income, had a successful meeting with Trump, leading to market speculation about his candidacy for Fed Chair.
While precious metals are in a wait-and-see mode, overnight crude oil prices also experienced thin trading due to a holiday. The subsiding internal unrest in Iran has reduced the likelihood of a US strike disrupting supplies from this major oil producer. However, the current situation in Greenland may reignite concerns over geopolitical risks, as Trump's tariff threats against Europe could weaken the energy demand outlook.
Signs of oversupply continue to pressure crude oil prices, with spot prices for some Middle Eastern crudes declining due to increased output from OPEC+ producers. The International Energy Agency (IEA) is set to release its latest market analysis report on Wednesday. The agency has previously warned of a significant oil supply glut this year; if the new report continues to project substantial oversupply, oil prices could turn downward again.
Nevertheless, despite the pervasive issue of oversupply, supply tightness persists in certain market regions. Issues at the ports of the Black Sea Caspian Pipeline Consortium and now problems at Kazakhstan's giant Tengiz oil field are causing short-term crude shortages in the Mediterranean region, providing some moderating effect on the downward pressure on oil prices.
