Against a backdrop of sharply escalating risk aversion, both gold and silver surged to new all-time highs on Tuesday. As former President Trump threatened to impose a new round of tariffs on European allies, deepening market anxieties over global trade and geopolitical prospects, investors found their options for defensive assets increasingly limited. Trump's tariff threat is linked to his attempts to acquire Greenland. Kitco senior analyst Jim Wyckoff noted that this statement "shook" the foundation of the alliance between the United States and its European and NATO partners. Although the "Sell America" trade once again grabbed headlines, Adrian Ash, head of research at BullionVault, suggested to media that the spillover of this anxiety is broader. "Trump's latest assault on the established world order is scaring off all investors," he added, noting that amidst a global sell-off in stocks and bonds, "gold and silver have hit new highs in all currencies."
Specifically, February gold futures on the COMEX closed at $4,765.80 per ounce on Tuesday, up 3.7% for the day and setting a historic record. March silver futures settled at $94.64 per ounce, posting a single-day gain of 6.9% and also refreshing its record. In stark contrast to the strength of precious metals, U.S. assets faced pressure. Weakness in U.S. Treasuries pushed the 10-year Treasury yield to an intraday high of 4.3%, while the three major U.S. stock indices recorded their largest single-day declines of the year. The Nasdaq fell over 2.3%, the S&P 500 dropped more than 2%, and the Dow Jones Industrial Average declined over 1.7%.
In this environment, buying gold is seen as a way to diversify exposure away from U.S. Treasuries and the U.S. dollar, a theme often referred to as "currency debasement trade." Michael Armbruster, managing partner and co-founder of Altavest, stated that although the news-driven stimulus surrounding Greenland might quickly fade, the medium-term trend for precious metals still points upward. He believes the core driver of the current rally stems from demand: gold is primarily supported by central bank buying, while silver is being propelled by rapidly expanding industrial demand.
Armbruster pointed out that factors ranging from data center infrastructure construction to Samsung's upcoming production of silver-based batteries are boosting silver demand, while supply growth struggles to keep pace. "For investors, a more rational strategy is to buy on dips rather than chase the headlines," he noted.
Comments