Here's Why Gold ETFs Remain Strong Bets

Persistent economic uncertainty and a volatile global trade landscape have elevated investors’ anxiety, providing strong tailwinds for gold. Mounting U.S. debt concerns, unfavorable inflation data and central banks' increasing purchases of the precious metal have contributed to gold’s sustained appeal.

Favorable fundamentals can position gold for further gains through late 2025 and into 2026. In such a scenario, increasing exposure to gold remains a smart strategy.

Investors should not be discouraged by any likely decline in gold prices. Rather, they should adopt a "buy-the-dip" strategy. Given the increasing macroeconomic uncertainty and geopolitical volatility, gold remains an essential hedge for all investors, regardless of their investment theme.

Here is why gold ETFs remain a compelling choice for investors.

Stubborn Inflation Boosts Gold’s Safe-Haven Status

Across extended investment periods, gold preserves its purchasing power, outpacing inflation and diversifying an investment portfolio due to its historical tendency to have a negative correlation with other asset classes.

Economists' concerns about renewed inflationary pressures triggered by President Trump's tariffs have proven accurate. According to recent data by the Bureau of Labor Statistics, as quoted on CNBC, the Consumer Price Index rose 0.3% in June, lifting the annual inflation rate to 2.7%.

Central Banks are Betting Big on Gold

Central banks are increasingly moving to strengthen their gold reserves and sustained central bank buying may drive gold prices.

According to CNBC, central banks are increasingly focused on strengthening their reserve buffers to guard against potential financial shocks amid rising global debt, persistent trade tensions and mounting geopolitical risks. Diversifying reserves, especially with assets like gold, offers critical stability in times of crisis.

According to a survey by the World Gold Council (“WGC”), as quoted on CNBC, approximately 95% of the 73 central banks surveyed expect their global counterparts to increase gold holdings over the coming year, highlighting a strong signal of gold's enduring appeal as a strategic asset.

According to Kitco, a major driver of gold’s strength is the growing appetite among emerging market central banks to increase their gold reserves.

Mounting US Debt Reignites Safe-Haven Demand

Concerns over U.S. debt levels can add pressure to investor confidence, making investors risk-averse and increasing the demand for safe-haven assets. The passage of President Trump’s tax-cut and spending bill has renewed concerns over the United States’ mounting long-term debt risks.

Lawmakers raised the U.S. government’s borrowing limit by an additional $5 trillion, potentially adding at least $3 trillion to the already staggering $37-trillion U.S. debt load.

Per analysts at WGC, as quoted on Kitco, gold prices are likely to benefit from soaring U.S. deficits and growing fiscal instability, even in the absence of an immediate crisis.

Here’s What Else is Fueling Gold’s Bull Case

The only word that can be used to describe the geopolitical landscape in 2025 is “complicated.” The constant volatile situation in the Middle East continues to drive investor interest toward safe-haven assets, keeping the yellow metal an attractive choice.

Amid the current economic and geopolitical climate, adopting a long-term passive investment strategy becomes the go-to approach for investors to weather short-term market storms.

Following tariff-related announcements by President Trump, renewed fears of a potential global trade war bolstered the demand for the safe-haven asset. Additionally, as fiscal and political uncertainty continues to mount in the United States, gold is expected to gain traction, reaffirming its status as a go-to safe-haven asset.

ETFs to Consider

Investors can enhance their exposure to the precious metal to potentially boost portfolio gains and better prepare for an uncertain market environment going forward. Increasing exposure to the yellow metal stands out as a smarter play than attempting to time the market, an approach that many investors may be tempted to employ.

Investors can consider SPDR Gold Shares GLD, iShares Gold Trust IAU, SPDR Gold MiniShares Trust GLDM, abrdn Physical Gold Shares ETF SGOL and Goldman Sachs Physical Gold ETF AAAU to increase their exposure to the yellow metal.

With a one-month average trading volume of 9.45 million shares, GLD is the most liquid option, ideal for active trading strategies. However, implementing an active strategy in the current landscape may not be the most effective approach.

GLD has also gathered an asset base of $102.12 billion, the largest among the other options. Performance across all funds has been largely consistent. The funds have gained 15.5% over the past three months and about 39.2% over the past year.

Regarding annual fees, GLDM is the cheapest option, charging 0.10%, which makes it more suitable for long-term investing.

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This article originally published on Zacks Investment Research (zacks.com).

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