By Steven M. Sears

One of gold's most remarkable investment qualities is that it doesn't issue earnings reports or change. This immutability is perhaps why gold so easily mirrors the fears of so many people.

The more that investors worry about inflation, the death of globalization, or more immediate concerns -- such as the Dow Jones Industrial Average's worst April performance since 1932 -- the higher gold's price tends to rise.

A large part of gold's allure is the psychological comfort people have in objects they can hold or secure in a vault. Unlike stock certificates, derivatives contracts, or even the full faith and credit of these United States, a bar of gold is always a bar of gold.

So far this year, the primary equity proxy for gold, the SPDR Gold Shares exchange-traded fund (ticker: GLD), is up some 28%, while the S&P 500 index, the primary proxy for the world's largest companies, has fallen 10%. On Tuesday, gold hit a record high. Incredibly, gold's price seems to be headed even higher as it has emerged as a primary way to hedge President Donald Trump's bellicose tariff policies, which are upending global markets.

The ETF's trading patterns indicate that investors have an extraordinary appetite to own gold. The opposite is true for the S&P 500. The good gold/bad stocks scenario is about to be stress-tested.

Over the next few weeks, investors will learn from a critical mass of the world's business leaders how Trump's tariffs are impacting earnings and business conditions. Should enough corporate leaders suggest Trump's policies aren't harming their business, stocks should benefit. The opposite is also true, which makes trading gold -- one of the rare bright spots in a dour market -- more difficult than is appreciated.

Investors tend to value corporate pronouncements above all others. Government economic reports are important, too, but ever since the 2008-09 financial crisis, those reports have often been viewed during polarizing political moments as less trustworthy.

As John Marshall, Goldman Sachs' derivatives strategist, has reminded clients, market-leading Big Tech companies will announce earnings -- by most measures the most important of all earnings reports -- during the next two weeks. A bad word or outlook from any of the major technology names could possibly push the S&P 500 even lower. Last quarter, Marshall said, analysts reduced tech earnings expectations but remained confident about future quarters. Much is at stake over the next two weeks.

Gold could decline if corporate forward-earnings guidance is better than expected. The opposite is also true if corporate leaders confirm that it is indeed difficult to anticipate future quarterly earnings as the White House seeks to change how businesses operate all over the world.

The SPDR Gold Shares ETF is trading at $311.12. During the past 52 weeks, it has ranged from $210.71 to $317.63.

To position for a continuation of gold's powerful rally, an investor could buy the ETF's May $315 call option and sell the May $325 call for a cost of $3.45. The call spread is worth a maximum of $6.55 if the ETF is at $325 at expiration.

To position for gold's decline, which could happen on positive tariff news, an investor could buy the May $305 put option and sell the May $295 put for a cost of $2.80. The put spread is worth a maximum of $7.20. Investors can position to benefit from either scenario by implementing both spreads at the same time, as the profit from one trade should offset the cost of the other.

The risk to option spread strategies is that the associated security moves less than the spread's cost, which means the money spent on the trade is lost. Still, spreads don't cost that much, and profits of 100% are typical if everything works out.

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April 25, 2025 21:30 ET (01:30 GMT)

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