Driven by growing expectations of Fed rate cuts and strong safe-haven demand, gold prices hit a new all-time high, breaching the $3,500 mark. The yellow metal emerges as a standout performer this year, climbing nearly 41.49% over the past year, according to Trading View.

Additionally, an increase in inflation concerns and sustained central bank buying further support the rally in gold prices.

According to analysts, as quoted on Reuters, portfolio diversification away from the greenback and the general weakness in the currency, coupled with safe-haven inflows amid geopolitical and trade tensions, have driven gold’s record rally this year.

Strong fundamental indicators could extend gold’s gains into late 2025 and 2026, boosting the case for increased portfolio allocation. Per J.P. Morgan’s head of global commodities strategy, Natasha Kaneva, the yellow metal’s prices could reach $4,250 by next year’s end, as quoted on the Reuters article.

In such a scenario, increasing exposure to gold remains a smart strategy.

Gold Shines Brighter on the Back of Rate Cut Expectations

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 the CME FedWatch tool, markets are anticipating a 91.7% likelihood of a rate cut in September. Markets also estimate a 96% likelihood of a rate cut in October and a 99.1% likelihood of a rate cut in December, according to the CME FedWatch tool.

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 it. 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 Trading View, the U.S. Dollar Index (DXY) has fallen about 5.63% over the past six months and around 9.47% year to date. Over the past month, DXY has seen a decline of 0.40%.

Political Uncertainty Boosts Safe-Haven Demand

Concerns about the Fed’s independence and the legal uncertainty surrounding the Trump administration’s tariffs contribute to the increasingly volatile macroeconomic environment, hinting that gold’s record-breaking rally may continue.

Continued geopolitical and economic instability make investing in the yellow metal an attractive investment strategy.

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. Given the increasing macroeconomic uncertainty and geopolitical volatility, gold remains an essential hedge for all investors, regardless of their investment theme.

Investors can consider SPDR Gold Shares (GLD Quick QuoteGLD - Free Report) , iShares Gold Trust (IAU Quick QuoteIAU - Free Report) , SPDR Gold MiniShares Trust (GLDM Quick QuoteGLDM - Free Report) , abrdn Physical Gold Shares ETF (SGOL Quick QuoteSGOL - Free Report) and iShares Gold Trust Micro (IAUM Quick QuoteIAUM - Free Report) to increase their exposure to the yellow metal.

With a one-month average trading volume of 9.08 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. Adopting a long-term passive investment strategy becomes the go-to approach for investors to weather short-term market storms.

GLD has also gathered an asset base of $109.18 billion, the largest among the other options. Performance across all funds has been mostly consistent. The funds have gained about 0.33% over the past month and about 35.6% over the past year.

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.