Panic as Opportunity? How Wall Street Investment Banks Profited $500 Million Amid Tariff Turmoil?

TradingKey - As the shadow of tariffs loomed over global markets, Wall Street banks seized the opportunity to profit.

Data shows that 12 banks, including Morgan Stanley and JPMorgan Chase, earned a staggering $500 million in precious metals revenue in the first quarter of this year. This marks their best quarterly performance in five years and the second highest in a decade. The surge was largely driven by a wave of arbitrage frenzy prompted by market fears over potential tariffs on precious metals.

Earlier this year, concerns about possible U.S. tariffs on gold and silver sent prices for precious metals futures on the New York Mercantile Exchange soaring well above those at other international trading centers. This price disparity created an ideal arbitrage opportunity for traders. They purchased large quantities of precious metals in Europe and Asia and transported them to U.S. futures warehouses for delivery, capturing the price difference before tariffs could take effect.

According to data, the precious metals revenue of the 12 Wall Street banks was approximately double the quarterly average of the past decade. Morgan Stanley led the pack, delivering 67 tons of gold valued at approximately $7 billion at current prices. As a dominant player in the precious metals market, JPMorgan Chase delivered over $4 billion in gold through the settlement of February futures contracts in a single quarter.

However, since precious metals were ultimately excluded from Trump's reciprocal tariff plan, the arbitrage boom ended as early as April.

Angad Chhatwal, head of Fixed Income, Currency, and Commodities at Coalition, noted that the scale of this arbitrage surge exceeded expectations. It was driven not only by short-term price fluctuations due to tariff policies but also by the doubling of gold prices since the end of 2022. The simultaneous increase in trading volume on the London market further expanded the operational space for investment banks.

This scenario is not unprecedented. During the logistics disruptions caused by the COVID-19 pandemic in 2020, banks like JPMorgan Chase chartered planes to transport gold to New York for delivery, reaping substantial profits. JPMorgan's metals trading division achieved a record income of $1 billion in 2020 as a result.