Gold ETFs That Investors Can Consider as the Metal Extends Its Rally

The yellow metal is already up about 58.71% year to date, supported by robust central-bank buying, steady retail demand, a weakening dollar, and rising market and economic volatility. Gold prices have gained 25.74% over the past six months and 2.43% over the past five days.

According to Reuters, gold prices jumped recently, reaching a two-week high, supported by U.S. economic data that reinforced expectations of a December Fed rate cut and weighed on the dollar.

As per the abovementioned Reuters article, U.S. retail sales came in softer than expected in September and the Producer Price Index rose 2.7% from a year earlier, the same increase seen in August.

Dollar Weakness and Fed Expectations Lift Gold’s Case

The greenback's value tends to move inversely with interest rate adjustments by the Fed. Interest rate cuts by the Fed make the dollar less attractive to foreign investors, as this weakens the U.S. dollar.

Per TradingView, the U.S. Dollar Index (DXY) has fallen 0.35% over the past five days and 8.03% year to date. The index has recorded an all-time decline of 16.75%. A weaker U.S. dollar generally leads to higher demand for gold, pushing its price upward as it becomes more affordable for buyers holding other currencies.

Per the CME FedWatch tool, markets are anticipating an 85% rate cut in the December meeting, signifying a significant improvement from 50% seen just last week. Per Bloomberg, expectations for lower rates grew as Kevin Hassett, widely viewed as the top contender for the next Fed chair, is believed to share President Trump’s support for lower borrowing costs, as quoted on Yahoo Finance.

Why Gold’s Rally Might Extend Into 2026

Underlying fundamentals remain solid, suggesting that the precious metal could extend its rally into 2026, strengthening the argument for increased portfolio exposure. Additionally, the yellow metal remains a crucial hedge for investors amid growing macroeconomic and geopolitical uncertainty.

Gold continues to serve as an effective diversification tool for tech-heavy portfolios. Concentrated rallies in select stocks can expose markets to significant drawdowns, highlighting the need for broader portfolio diversification. With valuations elevated and concerns over a potential AI-driven bubble rising, investors have even more reason to seek alternatives beyond concentrated equity exposure, making investing in gold an attractive investment strategy.

Additionally, according to Ray Dalio, most investors should allocate 10% to 15% of a well-diversified portfolio to gold, citing it as his preferred safe haven over US Treasurys, as quoted on Investopedia.

ETFs to Consider

In today’s market environment, relying on an active approach may be less advantageous. Adopting a long-term passive investment strategy becomes the go-to approach for investors to weather short-term market storms.

Investors should not be discouraged by any likely decline in gold prices. Instead, they should adopt a "buy-the-dip" strategy. Below, we highlight a few funds where investors can increase their allocation to gain greater exposure to gold.

Physical Gold ETFs          

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

With a one-month average trading volume of 12.78 million shares, GLD is the most liquid option. GLD has gathered an asset base of $136.26 billion, the largest among the other options. Regarding annual fees, GLDM and IAUM are the cheapest options, charging 0.10% and 0.09%, respectively, which makes them more suitable for long-term investing.

Gold Miners ETFs

These ETFs focus on gold miners, usually magnifying gold’s gains and losses. They provide access to the gold mining industry, not the commodity’s price.

Investors can consider VanEck Gold Miners ETF GDX, Sprott Gold Miners ETF SGDM, VanEck Junior Gold Miners ETF GDXJ and Sprott Junior Gold Miners ETF SGDJ.

With a one-month average trading volume of 26.39 million shares, GDX is the most liquid option. GDX has also gathered an asset base of $21.79 billion, the largest among the other options. Regarding annual fees, SGDM and SGDJ are the cheapest options, charging 0.50%.

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

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