5 Reasons Why Gold ETFs Are Smart Bets Now
On Feb. 3, 2025, gold bullion reached an all-time high above $2,830 per ounce before retreating slightly. It closed up 0.6% after Trump announced a one-month delay on his planned 25% tariffs against Canada and Mexico.The sudden policy shift caused the U.S. dollar to weaken from its highest level in over two years, making gold more affordable for global buyers. Gold bullion ETF SPDR Gold Trust GLD has advanced 5.9% so far this year (as of Feb. 3, 2025).Below we highlight a few reasons why gold ETF investments could be a good idea now.Market Uncertainty Drives Safe-Haven DemandGold surged toward a record high as uncertainty surrounding President Donald Trump’s tariff policies fueled demand for the precious metal as a safe-haven asset. Despite the tariff delay for Canada and Mexico, market concerns persist over the broader trade landscape. The United States is set to implement a 10% tariff on Chinese imports starting Feb. 4, 2025, although Trump indicated he would discuss the issue with Beijing.Trade War Fears Fuel Precious Metals SurgeEven before the latest tariff developments, concerns over a trade war had been driving up gold and silver prices in the United States. Domestic prices have recently surpassed international benchmarks, prompting dealers and traders to accelerate shipments of precious metals into the country ahead of potential tariffs, per Bloomberg, as quoted on Yahoo Finance.This market volatility has also caused a surge in lease rates for gold and silver—the returns earned by lending out bullion stored in London’s vaults on a short-term basis.DeepSeek-Led Volatility Boosts Gold’s Appeal Wall Street faced a setback last week due to the DeppSeek rout. DeepSeek, a Chinese startup developing AI models, grabbed headlines with the release of its new R1 model in late January. The company revealed that training the R1 model cost just $5.6 million, significantly less compared to the $100 million required to train OpenAI's GPT-4 model.This raises important questions about AI investment and the potential rise of more cost-efficient artificial intelligence agents, which could disrupt the current market dynamics (read: Will 2025 See Slowing AI Investments in Big Tech? ETFs in Focus).Amid the ongoing AI-powered market rally, the DeepSeek revelation came as a shock. The S&P 500 and the Nasdaq have solid exposure to Big Tech companies currently under investor scrutiny. This incident further reinforced gold's appeal as a safe-haven investment (read: Worried About the Magnificent 7? ETFs to Diversify Tech-Heavy Portfolios).Not-So-Upbeat U.S. GDP DataInvestors remain uncertain about the resilience of the U.S. economy in the face of a potential trade war and how tariffs could impact inflation. Note that the United States' Gross Domestic Product (GDP) grew at an annual rate of 2.3% in the fourth quarter of 2024. This figure followed the 3.1% expansion recorded in the third quarter and missed the market expectation of 2.6%.Meanwhile, the Gross Domestic Product Price Index rose by 2.2% in the fourth quarter, falling short of analysts' forecast of 2.5%. Additionally, the core Personal Consumption Expenditures (PCE) Price Index increased by 2.5% on a quarterly basis, aligning with market expectations. A lower-than-expected GDP growth rate may leave some investors worried and lead them to seek shelter in safe-haven assets like gold.Fed Stayed Put The Federal Reserve recently paused interest rate cuts, opting for a "wait-and-see" approach as it assesses the new administration’s policies. However, it is expected that the Fed policy will remain easy in the coming months. The Fed is unlikely to raise interest rates, even if inflation picks up. An accommodative Fed policy is a plus for the non-interest-bearing assets like gold (read: Top Events of 2024 & ETF Predictions for 2025).Gold ETFs in Focus Against the above-mentioned backdrop, gold-backed exchange-traded funds (ETFs) like SPDR Gold MiniShares Trust (GLDM), iShares Gold Trust IAU, iShares Gold Trust Micro IAUM, GraniteShares Gold Trust BAR and Goldman Sachs Physical Gold ETF AAAU are primed for gains.Want key ETF info delivered straight to your inbox?Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week.Get it free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report SPDR Gold Shares (GLD): ETF Research ReportsTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks
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