Why Investors Should Rush to Gold ETFs?
Gold remains a vital part of an investor portfolio, as diversification needs and tariff-driven uncertainty push investors toward safe-haven assets. Central banks’ increasing purchases of the precious metal and a surge of inflows into gold ETFs have also boosted gold prices.To safeguard one’s portfolio from an economic slowdown or potential recession and to capitalize on a weakening greenback, investors can increase their exposure to the precious metal. Here are a few key reasons why investing in gold ETFs could be a smart move.Tariff Tensions Push Investors Into Caution ModeEscalating global trade tensions between the United States and its key trading partners, amid growing fears of a prolonged trade war that could push the global economy toward recession, has led to increased investor demand for safe-haven assets.This has led to a sharp decline in U.S. markets, with the S&P 500 falling around 10% since last week, extending its total decline to 14% since the start of the year. According to Yahoo Finance, if President Trump decides on keeping tariffs in place, the economy could contract rapidly, potentially pushing the S&P 500 into bear market territory.Mixed signals from the Trump administration regarding tariff implementation have triggered significant market losses. Investors should brace for more turbulence ahead, with the volatility surrounding tariffs expected to stay. This makes increasing exposure to the precious metal a smart strategy.According to Reuters, escalating trade tensions resulted in a weaker dollar. Per Trading View, U.S. Dollar Index (DXY) has fallen about 1.15% over the past month and around 5.17% 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.The current economic landscape highlights the importance of portfolio diversification and increasing exposure to gold offers investors a strong hedge amid uncertainty.Wealth Protection Amid Fears of Recession During periods of economic uncertainty, like recession, gold attracts more investors due to its enduring value. As returns on bonds, stocks and real estate decrease, interest in gold rises, boosting its value.According to Blackrock CEO Larry Fink, as quoted on CNBC, business leaders widely believe the U.S. economy may already be in a downturn. Larry also believes that Trump’s tariff policies could fuel inflation, making it challenging for the Fed to cut rates, which is a common response during recessions.Trump Tariffs to Boost InflationAccording to JPMorgan Chase CEO Jamie Dimon, as quoted on CNBC, recent tariffs announced by President Donald Trump could drive up prices on both domestic and imported goods, further putting pressure on an already slowing U.S. economy.Consequently, 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.ETFs to ConsiderInvestors can increase their exposure to the precious metal, to potentially boost portfolio gains and better prepare for an uncertain market environment going forward. Investors should keep a long investment horizon and avoid reacting to short-term market volatility.Investors should not be discouraged by any likely decline in gold prices, such as the recent drop that pushed the metal to a four-week low. Rather, they should adopt a "buy-the-dip" strategy. Given the increasing possibility of a recession and escalating trade war, gold remains an essential hedge for all investors, regardless of their investment theme.Investors can consider SPDR Gold Shares GLD, iShares Gold Trust IAU, SPDR Gold MiniShares Trust GLDM, abrdn Physical Gold Shares ETF SGOL and Goldman Sachs Physical Gold ETF AAAU to increase their exposure to the yellow metal. All the options have a Zacks ETF Rank #3 (Hold).With a one-month average trading volume of about 10.93 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 $93.48 billion, the largest among the other options. Performance across all funds has remained largely consistent. The funds have gained about 9.88% over the past month and 19.20% 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. 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 Reports iShares Gold Trust (IAU): ETF Research Reports abrdn Physical Gold Shares ETF (SGOL): ETF Research Reports SPDR Gold MiniShares Trust (GLDM): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks
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