2025 may go down as the year of gold, particularly if second half markets follow first half trends. Advisors looking to add or enhance existing gold exposures in their portfolio have a range of strategies to consider within the ETF vehicle.
Gold notched a number of record highs this year on heightened tariff and trade concerns. Worry over mounting U.S. government debt further compounds uncertainty for equities and bonds alike. As the first half of the year draws near, very little clarity appears for the direction of inflation, interest rates, and U.S. tariff policy. Add in rising geopolitical tensions and potential weakening in the jobs market, and it makes for a murky and likely muted back half of 2025.
It’s the kind of environment that safe haven assets like gold traditionally thrive in. Prized for the store of value that gold provides, it proves a popular refuge when market drawdowns and uncertainty threaten. And indeed, that’s been the case this year.
Gold reached an all-time high in April of $3,500 per ounce as equities sold off on elevated trade tensions between the U.S. and China and fears that the executive branch would attempt to remove Federal Reserve Chair Jerome Powell. Although gold prices retreated, renewed trade tensions in June have gold holding steady at $3,350, above support levels.
While the strong performance of gold for much of this year caused some to question if the precious metal’s price had more runway, the unique and complex risk environment this year could prove favorable for further gains.
“A potent mix of post-stimulus fiscal drag, tariff-induced supply shocks, waning consumer confidence, a weakening labour market, and deteriorating real spending power may soon warrant a dovish and potentially stronger-than-expected policy pivot from the Federal Reserve, potentially then sending bullion prices higher towards USD 4,000,” Ole Hansen, head of commodity strategy at Saxo Bank, told Kitco.
Physical Gold ETF Offerings
Advisors will likely have a great deal of familiarity with the biggest names in gold ETFs. Physically backed, traditional gold ETFs like the SPDR Gold Shares (GLD) and the iShares Gold Trust (IAU) continue to accumulate flows this year. Both funds seek to track the price performance of gold bullion by holding physical gold in secure vaults. They provide exposure to gold without the hassle of direct investment, coupled with the efficiency and affordability of the ETF wrapper.
The abrdn Physical Gold Shares ETF (SGOL) and the GraniteShares Gold Trust (BAR) offer the lowest cost entry point to full shares of physically backed gold. Both funds carry management fees of 0.17%. SGOL seeks to only hold London Good Delivery gold refined after January 1, 2012. This ensures the gold is screened for a number of environmental and humanitarian factors.
The addition of gold mini and micro physically backed ETFs offers a lower entry point for investors. These strategies help to democratize exposure to physically backed gold with the lowest fees of gold ETFs on the market. The SPDR Gold MiniShares (GLDM) seeks to track the price of gold by holding bars of gold. However, it offers fractional exposure, capturing the price of 1/50th of an ounce of gold, with a fee of 0.10%. Meanwhile, the iShares Gold Trust Micro (IAUM) offers an even lower price point entry for investors, coupled with management fees of 0.09%. Also physically backed but with fractional exposure, IAUM allows investors to accumulate more shares at a lower cost.
Rounding out physically backed ETF strategies is the VanEck Merk Gold ETF (OUNZ). The fund holds gold bars but allows investors to take physical delivery of gold in exchange for their shares. Because the gold is already owned by the investor, taking physical delivery does not trigger a tax event.
Synthetic & Hybrid Gold ETF Strategies
The proliferation of options-based strategies in recent years has brought more investors and flows into derivative strategies. While many investors prefer the familiarity of physically backed gold ETFs, synthetic gold ETFs use options to capture gold price movements.
These strategies use a combination of call and put options on the same underlying security to simulate its performance. Buying call options on a security (such as a physically backed gold ETF) allows the strategy to capture upside price momentum by the underlying security. Meanwhile, selling put options on the same security will capture price declines. Together, the call and put provide exposure to the price returns of the underlying security.
The FT Vest Gold Strategy Target Income ETF (IGLD) seeks to capture the price returns of the SPDR Gold Shares (GLD) through its synthetic options strategy. The fund also generates reliable income via Treasuries that is 3.85% above the income generated by one-month U.S. Treasuries on an annual basis.
In addition to synthetic exposures are strategies that use a hybrid approach. Such is the case for the recently launched NEOS Gold High Income ETF (IAUI). This fund combines physical and synthetic gold exposure in its pursuit of high income. It invests up to 25% in physically backed gold ETFs while also tracking the price of gold through a synthetic options strategy on gold ETPs. IAUI combines this with covered call writing to generate additional high income.
Leveraged & Inverse Gold ETFs
For experienced investors with a high-risk appetite, leveraged and inverse gold ETFs offer the chance to magnify potential returns, as well as losses. These strategies use futures, swaps, and other derivatives to achieve their goals, and do not offer direct gold exposure.
As with any leveraged fund, leveraged and inverse ETFs are meant to be held on a single-day basis. They're strategies that break the mold of the buy-and-hold approach common to most other investments. Holding a leveraged or inverse ETF for longer than a day will cause deviations in returns compared to the daily performance, often significantly.
The ProShares Ultra Gold (UGL) is the largest in the category and offers bullish exposure to gold prices. The fund seeks to generate two times the daily performance of the Bloomberg Gold Subindex, before fees and expenses. The underlying index does not always offer the same performance as the spot gold price movements.
Should markets stabilize in the second half, and trade policy level out, gold prices could potentially lose momentum. For experienced investors bearish about gold price movement, the ProShares Ultra Short Gold (GLL) might be worth consideration. The strategy offers twice the daily inverse performance of the Bloomberg Gold Subindex.
For more news, information, and analysis, visit VettaFi | ETF Trends.
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