This is still a problem in Ubuntu 17.10, if your shell doesn't use OSC 7
to inform gnome-terminal about the current working directory.

In theory /etc/profile.d/vte-2.91.sh should set it up automatically, but
for some reason that doesn't happen for me.  I think that reason is
because in Ubuntu gnome-terminal doesn't launch login shells by default,
and thus /etc/profile is ignored.

I don't know why the commits from 2012 that are supposed to check $PWD
do not work any more.  Perhaps a newer version removed them, when the
OSC 7 was deemed to be the correct solution?

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Desktop Bugs, which is a bug assignee.
https://bugs.launchpad.net/bugs/263637

Title:
  Gnome-terminal follows symbolic links instead of staying in the
  current directory when opening a new tab

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