Flight to Safety Intensifies
Gold and silver typically gain traction during periods of heightened uncertainty, and the market backdrop has offered multiple catalysts. Earlier this month, U.S. forces captured Venezuela’s president on January 3 and assumed control of the country’s oil industry. In the Middle East, Trump suggested an imminent military strike on Iran amid a crackdown on civil unrest, only to soften the rhetoric last week. Meanwhile, fighting in Ukraine shows little sign of abating, and reconstruction in Gaza is widely expected to take years.
Against this backdrop, equities in Europe and the Asia-Pacific region began the week on a weaker footing. Shares of major European carmakers and luxury-goods producers retreated after the tariff threat emerged. The Stoxx Europe 600 Automobiles & Parts Index fell 2.2% in early trading, while the Stoxx Europe Luxury 10 Index lost 2.9%.
Market sentiment has also been influenced by the U.S. Justice Department’s criminal investigation of Federal Reserve Chair Jerome Powell, a development that could complicate monetary-policy expectations. The inquiry coincides with sustained pressure from the White House for lower interest rates, increasing investor unease about central-bank independence.
Underlying Fundamentals Remain Supportive
The broad backdrop of declining real yields and ongoing reserve diversification by central banks continues to underpin precious-metal demand, according to a sectoral outlook from asset manager Ninety One. Portfolio manager George Cheveley noted that gold’s advance “has been grounded in fundamentals that are still very much in place,” adding that margins at current prices are projected to be four to five times higher than in 2024.
Silver, which often follows gold’s trajectory but also enjoys industrial demand, “looks comfortable” at the current price level, the report said. Both metals benefit from a combination of safe-haven flows and expectations that global interest rates will remain subdued or decline further.
Those expectations have intensified as investors weigh the impact of Trump’s tariff strategy and assess the potential economic fallout. European officials have signaled the possibility of retaliatory duties and broader counter-measures, raising the prospect of another trade confrontation that could dent growth on both sides of the Atlantic.
Base Metals Edge Higher on Structural Demand
Other industrial metals advanced on Monday, though their gains were more closely tied to long-term demand drivers than to immediate geopolitical risk. March copper futures added 0.54% to $5.8625 per ounce, trimming an early-January surge. Analysts cited robust demand from energy-transition projects and data-center build-outs as primary supports for the red metal’s “attractive” risk-reward profile.
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Copper’s outlook has drawn attention from investors focused on renewable-energy infrastructure, electric vehicles and grid upgrades—sectors expected to require substantial volumes of the conductive metal. A recent International Energy Agency report projects a significant supply gap without accelerated investment in new mining capacity.
Global Markets Monitor Developing Risks
Monday’s price action underscores the extent to which metals markets have become a barometer of geopolitical stress. With risk assets ranging from European automotive stocks to emerging-market currencies under pressure, bullion’s appeal has grown. Exchange-traded products backed by physical gold registered net inflows for a sixth consecutive session, while options traders reported elevated demand for out-of-the-money calls on both gold and silver futures.
Elsewhere, sovereign-bond yields in major economies slipped as investors flocked to perceived safe havens. The U.S. 10-year Treasury yield fell below 3.40% in early New York trade, its lowest level in nearly three weeks, as futures priced in a rising probability of a Federal Reserve rate cut later this year.
Currency markets reflected similar caution. The U.S. dollar gained against a basket of major currencies, benefiting from its own safe-haven status, while the euro weakened amid concerns about the potential economic toll of any tit-for-tat tariff escalation.
Outlook Hinges on Policy and Geopolitics
Looking ahead, traders will monitor several variables that could sway metal prices. First, any clarification on the scope and timeline of U.S. tariffs linked to Greenland could shift expectations on economic growth and risk sentiment. Second, developments in the Justice Department’s investigation of Chair Powell may influence perceptions of future Fed policy moves. Finally, ongoing geopolitical flash points—particularly in Iran, Venezuela and eastern Ukraine—remain potent sources of market volatility.
For now, analysts see limited impetus for a sharp reversal in gold and silver. “With real rates likely to fall and central banks continuing to diversify their reserves, we see more reason for gold to consolidate or edge higher than to sell off sharply,” Ninety One’s outlook concluded, capturing the prevailing view among many market participants.
Crédito da imagem: CNBC
