Gold Up, Tariffs Worse, Insider Trading?

It was a dramatic week for financial markets. President Donald Trump’s surprise decision to temporarily pause tariffs on select countries sparked a rally in US stocks. At the same time heightened trade tensions with China sent gold prices to new records. While the president’s online remarks offering reassurance and advocating stock purchases appeared to buoy investor sentiment, they also triggered calls for investigations into whether any individuals profited from advanced knowledge of Trump’s policy shifts.

Potential Insider Trading in Options Markets

Moments before the president’s social media post on Wednesday announcing a pause in certain tariffs, options traders placed huge bets anticipating a market rebound. These bullish trades involved the SPDR S&P 500 ETF, with thousands of SPY call contracts changing hands at around 1:00 p.m. ET. Soon after President Trump’s 1:18 p.m. ET message, the S&P 500 had an incredible 9.5% jump, sending those call option values soaring from just a few dollars into the tens of dollars.

The timing caught the attention of Democratic lawmakers, who have demanded transparency and potential inquiries into any market manipulation. However, options experts note that volume in equity derivatives has surged amid recent market volatility, making it challenging to determine if such trades stem from insider knowledge or simply good timing.

Massive derivative moves during volatile sessions are not unusual. Billions of dollars shift hands in options trades daily, and volume tends to spike during rapid market swings. The White House declined to address specific questions about potential insider trading, and The Securities and Exchange Commission also refused to comment on whether it would investigate the trades.

Social Media Frenzy

The focus on possible insider trading has been fuelled in part by online chatter and a spike in Google searches for the term. Earlier that day, President Trump posted that it was a “GREAT TIME TO BUY!!!” Just hours later, his post pausing certain tariffs shifted the market dramatically.

Gold Hits Record High on Escalating Trade Tensions

Some tariffs were paused, but the president raised the duties on Chinese imports all the way up to 125%. This weakened the Dollar and caused a rush to safety. Gold briefly reached an all-time high of US$3,171 per ounce before settling around US$3,167.

What Traders Got Wrong

But if tariffs were paused for 90 days, what’s the problem? US stocks pumped but then started to fall. To understand, one must dissect the changes to the tariff situation. By pausing tariffs on every country except China, traders saw this as a purely quantitative calculation. Countries getting their tariffs paused: Many. Countries getting a tariff hike: One (China). This is a huge mistake. To see why, turn over any product close to you and see where it was made. The increased tariffs on China heavily outweigh other countries combined, meaning that companies in the US (who make almost everything in China) still need to rotate to other supply chains and are not out of the deep end yet.

Over the weekend, Trump flipped again and now apparently wants to exempt certain tech products from tariffs. Let’s see if this is followed through with or if another flip comes. On the other hand, China has halted rare earth exports to the US This will surely hit the tech industry hard, but sadly it will also accelerate countries finding other ways to get rare earths.