Geopolitical tensions drive sharp rises in gas and gold prices

Since the beginning of January, gas prices in Europe have risen by around 40 per cent. The sharp increase is partly due to colder weather, but also to growing geopolitical uncertainty linked to the policies of US president Donald Trump. The same uncertainty has pushed gold and silver prices to historic highs.

Gas prices have climbed rapidly in recent weeks, raising concerns about whether Europe’s reserves will be sufficient during a prolonged cold spell. The EU’s gas storage facilities are currently approximately 45 per cent full, well below the 60 per cent average.

Developments outside Europe are also weighing on prices. A historic winter storm in the United States, bringing freezing temperatures and heavy snowfall, has disrupted energy markets. Weather forecasts indicate that the cold conditions are likely to persist in the near future.

However, weather alone does not explain the sharp rise in prices. Global geopolitical uncertainty is prompting countries around the world to secure additional gas supplies. This uncertainty has increased in recent weeks amid tensions between the EU and the administration of US president Donald Trump.

Since the reduction in gas imports from Russia, Europe has become largely dependent on liquefied natural gas from the United States. This has fuelled concerns about the stability of the energy agreement concluded between the EU and the US last year. Some fear that Trump could use Europe’s reliance on American gas as leverage in broader political disputes, including over Greenland.

Despite the recent surge, gas prices remain far below the record levels seen in 2022, when prices briefly reached 227 euros per megawatt hour. Last week’s increase merely brings prices back to levels recorded in August last year, after a period of exceptionally low prices.

Geopolitical uncertainty has also caused the price of gold to reach over 5,000 dollars per ounce for the first time in history. The precious metal has risen by around 17 per cent since the start of the year and has more than doubled over the past two years. In January 2024, an ounce of gold still cost around 2,000 dollars.

Investors have been driven to the safe-haven assets due the uncertainty caused by Trump’s policies. That includes his tariff threats over Greenland and pressure on the US Federal reserve to reduce interest rates. Other economic uncertainties, such as fears of the AI bubble bursting and rising interest rates in Japan, are also driving up the price.

In tumultuous geopolitical conditions, gold is widely seen as a stable investment. But silver has also benefited from investors’ flight to safety. The price of silver reached a record 109 dollars per ounce on Monday.

^{PHOTO © Mandel NGAN / AFP}

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