Photo by Katie Harp on Unsplash
 

Gold extended its rally in early Tuesday trade, pushing deeper into uncharted territory as safe-haven demand surged. The move followed renewed geopolitical tensions after Donald Trump reaffirmed his desire to acquire Greenland, after escalating matters at the weekend by threatening tariffs on European nations that oppose the proposal. The rhetoric has rattled investors and strained relations with long-standing US allies.  European leaders appear to be hardening their stance. Germany has warned that Trump has crossed a red line, while reports suggest the European Union is actively discussing retaliatory tariffs on up to €93bn of US goods. Unsurprisingly, risk sentiment has deteriorated sharply. US equity futures and European stocks have moved lower, while gold surged to fresh record highs.

Adding fuel to the rally, the so-called “Sell America” trade appears to be resurfacing. The US dollar index has weakened broadly, even against commodity-linked currencies, providing an additional tailwind for precious metals. With renewed fears of a transatlantic trade war, gold is once again finding strong support from geopolitical uncertainty.
 

What Could the EU Do Next?

European policymakers are weighing several response options to Trump’s tariff threats tied to Greenland.

The first is diplomacy. So far, this approach has delivered little. However, the World Economic Forum in Davos offers a narrow window for direct talks, with Trump, the NATO secretary general, and senior European leaders all in attendance. Any sign of de-escalation could lift global risk assets, particularly European equities such as the DAX.

The second option is delaying ratification of the EU–US trade deal agreed last summer. While this would also weigh on European growth, it would carry meaningful consequences for the US. This scenario would likely be negative for risk assets overall and supportive for safe-haven spot gold prices.

The third, and most severe, option would be activating the EU’s anti-coercion instrument. Originally designed for hostile states, its use against the US would be almost unthinkable. If triggered, it could allow Europe to impose tariffs, restrict US firms’ access to the single market, and limit American investment in the bloc. This would almost certainly provoke retaliation from Washington and raise the risk of a full-blown trade war, a highly negative outcome for equities and other risk assets, but potentially strongly supportive for gold.
 

Gold Technical Analysis

From a technical analysis point of view, the trend remains firmly bullish. Initial support is seen at Monday’s high near $4,690, followed by Friday’s hammer head at $4,621. Below that, $4,550 marks the prior all-time high from December, with $4,500 acting as a key psychological level that needs to hold to maintain bullish control.
 

On the upside, momentum remains strong with little technical resistance. Round-number targets at $4,800 and $4,900 come into focus next, while the $5,000 level stands out as the longer-term psychological objective if geopolitical tensions continue to escalate.

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