Gold ETF Sales Skyrocket Amid Price Surge

Amid geopolitical uncertainty, there is a silver lining for gold.

Investors have been pouring money into the precious metal’s ETFs this year at a rapid clip, with nearly $21 billion flowing into US-domiciled products through July, data from Morningstar Direct show. Demand hasn’t even come close to that level since 2020, when the Covid-19 pandemic prompted a rush to gold. The asset is a safe haven, and there are several big reasons investors are looking for that this year, observers say. To start, the price of gold is up this year by nearly 29%.

“Gold’s a speculative asset, so the main driver of price and interest is the safe-haven demand amid geopolitical and economic uncertainty,” said Bryan Armour, director of ETF and passive strategies research for North America at Morningstar Research Services.

Tariffs, the Dollar and Central Banks

President Donald Trump’s announcement and enactment of high tariffs on numerous global trading partners led to a spike in gold ETF sales, said Aakash Doshi, head of gold strategy at State Street Investment Management. Globally, net sales have been positive for the past six of seven months and 10 of the past 13, he noted. “The gold market rally that began 18 months ago — it started the year off with a bang,” he said. “Now it’s more of a wait-and-see mode … The big driver has been a weaker dollar.” US retrenchment has investors looking for an alternative to the dollar, with gold being snapped up as a reserve by central banks, he said.

Data from Morningstar Direct show that US gold ETF demand has fluctuated over the past couple of years:

• While close to $21 billion has gone into them this year through July, just $1.7 billion flowed in on a net basis in 2024, and $4.4 billion flowed out in 2023, compared with net negative sales of $3.2 billion in 2022 and $12.4 billion in 2021. Amid the 2020 pandemic, $30.4 billion flowed into them.
• Net assets in US gold ETFs reached about $179 billion in July, with more than half of that in one fund, SPDR Gold Shares (GLD).

Gold Bugs, Beware: Portfolio construction is not one-size-fits-all, Doshi said, but many investors can benefit from a 3% to 10% allocation to gold in the long term. It is a diversifier and has low correlation to the stock market, but that doesn’t mean it’s negatively correlated, Armour said. And for those considering gold or digital assets as a hedge, there is room for both, Doshi said. “You’re seeing an environment with gold on your left tail and Bitcoin on your right tail.”