Reference News Network, January 26 report: According to the website of the UK's Financial Times, the crisis in Greenland has once again raised concerns about the White House's erratic decision-making, prompting investors to seek safe-haven assets other than the US dollar; as a result, gold prices are heading for their best weekly performance in nearly 20 years, while the dollar may record its worst weekly performance since May last year.

On the 23rd, gold prices reached a historical high of nearly $5,000 per ounce, while silver prices broke through the $100 per ounce threshold for the first time.

Rona O'Connell, an analyst at StoneX, said: "The world is hedging against ongoing uncertainty. In this turbulent period, gold still maintains its status as the ultimate safe-haven asset."

US President Donald Trump threatened to impose tariffs on European allies if they refused his demand to control Greenland, which led to sharp sell-offs on Wall Street this week, followed by a sudden change of heart on the 21st, causing stock markets to rebound.

However, the dollar has struggled to regain ground, and with further decline on the 23rd, the dollar index against major currencies such as the pound and euro fell 1.7% for the week.

Gold prices rose more than 8%, recording the largest weekly increase since the 2008 global financial crisis. A weak dollar itself can boost gold and silver prices, as it reduces the cost of purchasing these dollar-denominated metals for holders of other currencies.

The recent surge has pushed gold's historic two-year rally to new heights, driven by increased investor interest and purchases by central banks seeking to diversify from dollar reserves.

Before Trump issued tariff threats over the Greenland issue, the US had forcefully taken control of Venezuelan President Nicolas Maduro, and the US Department of Justice had launched a criminal investigation into Federal Reserve Chair Jerome Powell.

Siya Shah, chief global strategist at Principal Global Investments, said these events have caused some changes in investors' "attitudes toward the dollar."

She said: "Behind a series of unfolding farces, damage is accumulating. This could further reinforce the argument for 'diversification away from US assets.'"

The Greenland crisis has once again raised concerns about the political risks of US assets: for a long time, US assets have been a safe haven for global capital. This concern previously caused the dollar to plummet by 9% last year, marking its largest drop since 2017.

Earlier this week, US stocks, bonds, and the dollar all declined together, reviving the "sell America" trade that was triggered by Trump's tariff campaign in April last year.

As another long-term safe haven in the foreign exchange market, the Swiss franc rose 2.2% against the dollar this week, recording its best performance since June last year. The euro rose 1.7% against the dollar, breaking above 1.17 dollars.

Shah from Principal said: "The credibility, or at least the reliability, of policies has weakened. I think the expectation of dollar depreciation may have increased."

Wall Street had previously expected the dollar to weaken further this year, due to the Fed continuing to cut interest rates, while other major central banks are expected to remain inactive, and global investors continue to hedge their dollar assets to cope with dollar volatility.

This hedging activity naturally lowers the value of the dollar.

But Peter Schaffrik, global macro strategist at RBC Capital Markets, said the uncertainty caused by Trump's threats against Greenland has increased the reasons for investors to hedge their dollar exposure.

Schaffrik said: "What we are seeing now explains why there is a (hedge) requirement, because these things can happen without warning at any time. Who can guarantee that another reversal won't happen suddenly tomorrow?"

(Translation by Lin Zhaohui)

Original source: toutiao.com/article/7599489537097663019/

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