Defensive ETFs Beyond Gold: Where to Invest When Metals Cool

Gold and silver posted their steepest declines in years, reversing sharply after a powerful rally that had pushed prices to record levels. Gold prices, which have added about 66.08% over the past year and 37.25% over the past six months, have fallen roughly 10.31% over the past five days and 5.35% in the most recent session. A similar pullback has also been observed in silver.

Geopolitical risks have been a primary driver of market volatility so far in 2026, with renewed tariff frictions further compounding investor uncertainty. U.S. military actions in January, a weakening U.S. dollar and concerns over Fed independence further boosted demand for defensive and safe-haven assets, supporting strong inflows into precious metal ETFs.

However, beyond these macro drivers, heavy speculative inflows also turned precious metals into a crowded trade. After losing momentum last week, gold and silver continued to slide on Monday, pressured by a stronger dollar and profit-taking.

According to Christopher Forbes, CMC Markets Asia and the Middle East head, gold’s recent retreat suggests a corrective phase after an exceptional run, without necessarily undermining the broader bullish narrative, as quoted on CNBC. The pullback supports the consensus among analysts that a price correction in precious metals was inevitable.

Dollar’s Comeback Takes a Toll on Gold and Silver

According to TradingView, the U.S. Dollar Index (DXY) has added 1.25% over the past five days, after falling about 1.60% over the past six months and 10.16% over the past year.

According to CNBC, following President Trump’s decision to nominate Kevin Warsh as Fed chair, the U.S. dollar strengthened as markets welcomed Warsh’s reputation and perceived independence, putting renewed pressure on gold and silver prices.

CME Margin Hike Sparks Fresh Wave of Selling in Metals

According to Reuters, after CME Group hiked margin requirements, gold and silver fell further on Monday, adding to last week’s sharp sell-off in metal prices. Per the Reuters article, rising margin requirements can pressure contracts by limiting speculative activity, curtailing liquidity and triggering position unwinds.

Defensive ETFs to Explore

Preserving capital and cushioning volatility are key for investors looking to navigate a potentially tumultuous period. With precious metal prices swinging sharply and gold and silver vulnerable to near-term corrections after strong rallies, investors may increasingly look beyond precious metals.

In this environment, alternative defensive ETFs are emerging as attractive options to help cushion portfolios during periods of heightened volatility, offering stability without relying solely on gold and silver.

Increasing allocations toward defensive funds may be a prudent strategy, allowing investors to participate in potential upside while still adding protection against elevated volatility. With ETFs offering diversification and tax efficiency, investors can use them to increase exposure to defensive funds.

In this environment, defensive ETFs focused on low volatility, high-quality balance sheets, stable cash flows and resilient sectors can offer a more predictable way to preserve capital while maintaining market exposure.

Below, we have highlighted a few areas in which investors can increase their exposure.

Value ETFs

Value ETFs focus on stocks characterized by strong fundamentals and robust financial health, which trade below their intrinsic value, representing undervaluation. They offer the potential for higher, more stable returns and lower volatility than growth and blend stocks.

Additionally, value ETFs can serve as a source of income through dividends.

Vanguard Value ETF VTV, Avantis U.S. Large Cap Value ETF AVLV and Vanguard Small Cap Value ETF VBR could be appealing options.

Consumer Staple ETFs

Increasing exposure to consumer staple funds can bring balance and stability to investors’ portfolios. Investors can allocate more money to consumer staple funds to safeguard themselves against potential market downturns.

Investors can consider Consumer Staples Select Sector SPDR Fund XLP, Vanguard Consumer Staples ETF VDC and iShares U.S. Consumer Staples ETF IYK.

Quality ETFs

Investors can consider funds like iShares MSCI USA Quality Factor ETF QUAL, Invesco S&P 500 Quality ETF SPHQ and JPMorgan U.S. Quality Factor ETF JQUA. Amid market uncertainty, quality investing emerges as a strategic response, providing a buffer against potential headwinds.

ETF Strategies Investors Can Use

Investors may lean more toward stability as risk aversion rises. Adopting passive, long-term strategies, such as buy-and-hold or dollar-cost averaging, could help navigate potential near-term pullbacks while still positioning for sustainable returns over time.

Adopting such strategies can help investors build a resilient portfolio. Both strategies stand out as effective ways to create portfolio momentum and build wealth in the long term, ignoring short-term price fluctuations.

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

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