Investors have piled fresh bets on gold and European defence stocks in response to US President Donald Trump’s threats to take control of Greenland, fearing a geopolitical rift that could end Nato, shatter the global ‌order and damage the dollar.Although gains in both are expected to continue regardless of what happens to Greenland, investors ‌face the dilemma of how to position for any ‍longer-term fallout.Trump wants to gain control of the Danish territory, through a purchase or even military means, while Greenland does not want to be part of the US, a stance supported by Europe and Canada.While investors have previously largely ignored these aspirations, the US seizure of Venezuela’s Nicolas Maduro in a surprise military raid has suddenly made them more tangible. For investors hoping for ‍less risk after last year’s tariff turmoil, the news makes for an uncomfortable start to 2026.The US administration’s threat to indict Federal Reserve Chair Jerome Powell has reignited concerns about its independence.Gold jumped more than 4% last week after Maduro’s capture and hit a new record high yesterday.European defence stocks hit fresh all-time highs yesterday and last week posted their biggest weekly jump in over five years, with a 10% gain.The soaring gold prices indicate global markets are concerned about the rising geopolitical risk.Non-yielding gold is traditionally seen as a safe haven for investors during wider market uncertainty or volatility. Many investors have already been calling for a large exposure to gold.The US ambitions on acquiring ‍Greenland could have far-reaching implications, not just for Nato but also efforts to end ‌war in Ukraine and China’s tensions with Japan and Taiwan.If the US forcibly took Greenland from fellow Nato member Denmark, it would likely not only mark the end of the military alliance but the wider balance of power.It would call into question much more the global order that’s essentially largely been established since Bretton Woods II, (or) the end of World War II, when Nato was created.If Europe must rely less on the US for its defence, it is no surprise that investors are buying European defence stocks, a sector that’s more than tripled since Russia’s 2022 invasion of Ukraine.German tank maker Rheinmetall rallied 19% last week, while Sweden’s Saab surged 22%.Beyond buying gold and defence stocks, other trades are more difficult for investors to pick.Political (and) geopolitical risk is very hard to price and markets typically do a very poor job of it, given that these are big-impact, but low-probability ​events. Positioning an investment portfolio for something that has a 1%, 5% chance of being realised is akin to assuming ‘well, 95% of the time I’m going to be wrong.’That helps explain why ‍there has been little broader impact, with world stocks at near record highs and Danish government bonds rallying alongside European peers. Denmark’s closely managed crown currency has been weakening, but rate differentials are a major factor and it is still close to the central rate at which it is pegged to the euro.Things could change quickly if the US took a military approach to Greenland. Unlike Venezuela it would be a big deal, sparking risk aversion in equities and (the) dollar.Traders reacted immediately when Moscow acted on its Ukraine threats, sparking major moves in oil, the ​euro and stocks.If the US were to seize Greenland by force, or maybe not by force, but under some sort of coercion, a rally towards Treasuries and a selloff in European government bonds, which quality investors wouldn’t see as a haven, is quite likely.Investors reckon that short-term, the dollar and Treasuries would benefit from a rush to safety. However, a breakdown in transatlantic relations could see that US pull fade and a return of worries about the dollar’s status, which flickered around last April’s tariff announcement.It is too soon to see any signs of that shifting on the back of the US action in Venezuela or its Greenland threats, with some saying it could prompt money to move out of the US. — Reuters