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Gold remains a vital part of an investor’s portfolio, driven by growing diversification needs and tariff-driven uncertainty. Central banks’ increasing purchases of the precious metal have also boosted gold prices.
The Trump administration’s chaotic tariff policies have continued to fuel global market volatility, making investors risk-averse and increasing demand for safe-haven assets. However, markets have welcomed recent news of trade talks between the United States and China, resulting in a slight uptick in investor risk appetite.
Tariff-driven uncertainty persists, and the full impact of the tariffs may be delayed. In such a scenario, increasing exposure to gold remains a smart strategy.
Central Banks Can’t Get Enough of Gold
According to the World Gold Council (WGC), as quoted on Mining.com, in first-quarter 2025, central banks added 244 metric tons of gold to reserves, 24% above the five-year average. The WGC also reported that 30% of central banks plan to increase their gold holdings over the year, the highest level ever recorded in their survey.
Sustained central bank buying could drive gold prices up. Per the World Gold Council, total first-quarter gold demand, including OTC investment, rose 1% year over year to 1,206 tons, marking the highest first-quarter demand since 2016.
A surge in gold ETF inflows contributed to a 170% year-over-year increase in total investment demand, reaching 552 tons, its highest since first-quarter 2022, per the WGC.
According to Gallup’s latest poll, as quoted on Mining.com, nearly 25% of U.S. adults currently view gold as the best long-term investment, a sharp increase from last year, marking the first time in over a decade that Americans are tilting toward gold over equities.
Inflation to Keep Investors on Edge
As the chaotic tariff policy of the Trump administration continues to fuel inflationary fears, increasing exposure to gold would be a smart move. 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.
According to Yahoo Finance, Consumer Price Index (CPI) for the month of April is forecasted to reflect the initial inflationary effects of the Trump administration’s tariff policies. Per Bank of America senior US economist Stephen Juneau, as quoted on Yahoo Finance, the broader inflation trend is still expected to move higher despite the near-term relief that can be anticipated due to the recent delay in reciprocal tariffs on China.
What Else is Powering Gold in the Background?
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. Increasing exposure to the yellow metal stands out as a smart play than attempting to time the market, an approach that many investors may be tempted to employ.
According to Mining.com, the recent change in Basel III norms, reclassifying the yellow metal under Tier 1 high-quality liquid asset from its previous classification as a Tier 3 asset, is more than just a regulatory shift. This reinforces gold’s role as a key monetary asset and a hedge against economic turmoil, recognition it as money.
Per Trading View, U.S. Dollar Index (DXY) has fallen about 4.59% over the past six months and around 6.38% year to date. Gold prices are inversely related to the value of the U.S. dollar. 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.
ETFs to Consider
Given the increasing possibility of a trade war driven by reciprocal tariffs, gold remains an essential hedge for all investors, regardless of their investment theme.
As optimism rises following the positive outcome of the U.S.-China trade talks, this may present a timely opportunity to consider gold. Investors should not be discouraged by any likely decline in gold prices. Rather, they should adopt a "buy-the-dip" strategy.
Investors can consider SPDR Gold Shares (GLD - Free Report) , iShares Gold Trust (IAU - Free Report) , SPDR Gold MiniShares Trust (GLDM - Free Report) , abrdn Physical Gold Shares ETF (SGOL - Free Report) and Goldman Sachs Physical Gold ETF (AAAU - Free Report) to increase their exposure to the yellow metal. Each fund has a Zacks ETF Rank #3 (Hold).
With a one-month average trading volume of about 13.94 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 $101.08 billion, the largest among the other options. Performance across all funds has remained largely consistent. The funds have gained about 6% over the past month and 17.4% over the past three months.
Regarding annual fees, GLDM is the cheapest option, charging 0.10%, which makes it more suitable for long-term investing.
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Here's Why You Should Stick With Gold ETFs
Gold remains a vital part of an investor’s portfolio, driven by growing diversification needs and tariff-driven uncertainty. Central banks’ increasing purchases of the precious metal have also boosted gold prices.
The Trump administration’s chaotic tariff policies have continued to fuel global market volatility, making investors risk-averse and increasing demand for safe-haven assets. However, markets have welcomed recent news of trade talks between the United States and China, resulting in a slight uptick in investor risk appetite.
Tariff-driven uncertainty persists, and the full impact of the tariffs may be delayed. In such a scenario, increasing exposure to gold remains a smart strategy.
Central Banks Can’t Get Enough of Gold
According to the World Gold Council (WGC), as quoted on Mining.com, in first-quarter 2025, central banks added 244 metric tons of gold to reserves, 24% above the five-year average. The WGC also reported that 30% of central banks plan to increase their gold holdings over the year, the highest level ever recorded in their survey.
Sustained central bank buying could drive gold prices up. Per the World Gold Council, total first-quarter gold demand, including OTC investment, rose 1% year over year to 1,206 tons, marking the highest first-quarter demand since 2016.
A surge in gold ETF inflows contributed to a 170% year-over-year increase in total investment demand, reaching 552 tons, its highest since first-quarter 2022, per the WGC.
According to Gallup’s latest poll, as quoted on Mining.com, nearly 25% of U.S. adults currently view gold as the best long-term investment, a sharp increase from last year, marking the first time in over a decade that Americans are tilting toward gold over equities.
Inflation to Keep Investors on Edge
As the chaotic tariff policy of the Trump administration continues to fuel inflationary fears, increasing exposure to gold would be a smart move. 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.
According to Yahoo Finance, Consumer Price Index (CPI) for the month of April is forecasted to reflect the initial inflationary effects of the Trump administration’s tariff policies. Per Bank of America senior US economist Stephen Juneau, as quoted on Yahoo Finance, the broader inflation trend is still expected to move higher despite the near-term relief that can be anticipated due to the recent delay in reciprocal tariffs on China.
What Else is Powering Gold in the Background?
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. Increasing exposure to the yellow metal stands out as a smart play than attempting to time the market, an approach that many investors may be tempted to employ.
According to Mining.com, the recent change in Basel III norms, reclassifying the yellow metal under Tier 1 high-quality liquid asset from its previous classification as a Tier 3 asset, is more than just a regulatory shift. This reinforces gold’s role as a key monetary asset and a hedge against economic turmoil, recognition it as money.
Per Trading View, U.S. Dollar Index (DXY) has fallen about 4.59% over the past six months and around 6.38% year to date. Gold prices are inversely related to the value of the U.S. dollar. 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.
ETFs to Consider
Given the increasing possibility of a trade war driven by reciprocal tariffs, gold remains an essential hedge for all investors, regardless of their investment theme.
As optimism rises following the positive outcome of the U.S.-China trade talks, this may present a timely opportunity to consider gold. Investors should not be discouraged by any likely decline in gold prices. Rather, they should adopt a "buy-the-dip" strategy.
Investors can consider SPDR Gold Shares (GLD - Free Report) , iShares Gold Trust (IAU - Free Report) , SPDR Gold MiniShares Trust (GLDM - Free Report) , abrdn Physical Gold Shares ETF (SGOL - Free Report) and Goldman Sachs Physical Gold ETF (AAAU - Free Report) to increase their exposure to the yellow metal. Each fund has a Zacks ETF Rank #3 (Hold).
With a one-month average trading volume of about 13.94 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 $101.08 billion, the largest among the other options. Performance across all funds has remained largely consistent. The funds have gained about 6% over the past month and 17.4% over the past three months.
Regarding annual fees, GLDM is the cheapest option, charging 0.10%, which makes it more suitable for long-term investing.