Trump's Greenland Threat Spurs Search for Alternatives to Gold and Defense

• Gold jumped more than 4% last week and reached a new record high on Monday, while European defense stocks posted their biggest weekly gain in over five years with a 10% jump, led by Rheinmetall (up 19%) and Saab (up 22%)
• A forcible U.S. takeover of Greenland from NATO ally Denmark could end the military alliance and upend the global order established since World War II, according to analysts
• Beyond gold and defense stocks, investors find it difficult to price geopolitical risk, with some warning that U.S. actions 'breaking the rules of the road' could prompt asset reallocation away from U.S. markets toward Europe and Asia

Summary: Trump's Greenland Threat Spurs Search for Alternatives to Gold and Defense

Key Developments:

President Trump's threats to seize control of Greenland from Denmark have triggered significant investor concerns about a potential geopolitical rift that could dissolve NATO and damage the U.S. dollar. These threats gained credibility following the U.S.'s surprise capture of Venezuela's Nicolas Maduro.

Market Response:

• Gold surged over 4% last week, hitting new record highs on Monday
• European defense stocks jumped 10% last week—their largest weekly gain in five years—and reached all-time highs
• German tank maker Rheinmetall rallied 19%; Sweden's Saab surged 22%
• Global stocks remain near record highs despite tensions

Key Players:

Primary companies benefiting include European defense contractors, particularly Rheinmetall and Saab. The sector has more than tripled since Russia's 2022 Ukraine invasion.

Market Implications:

Analysts warn that a forced U.S. seizure of Greenland would fundamentally destabilize the post-WWII global order established at Bretton Woods. This could end NATO and affect China's approach to Taiwan. However, investors face difficulties pricing political risk, with some experts noting these remain low-probability events despite high potential impact.

Longer-term Positioning Challenges:

While gold and defense stocks offer immediate hedges, other trades prove complicated. Short-term scenarios favor the dollar and Treasuries in a flight to safety, but longer-term breakdown in transatlantic relations could trigger shifts away from U.S. assets toward Europe and Asia.

Additional Concerns:

Trump has also threatened intervention in other regions and pressured Federal Reserve Chair Jerome Powell, raising questions about Fed independence and amplifying investor uncertainty entering 2026.