Why Gold ETFs Are Suddenly Tarnishing

What goes up, must come down.

Gold ETFs have enjoyed serious upside in recent years, with the price of the precious metal increasing 64% in 2025 after a 26% climb the year before. That drove strong performance in exchange-traded funds like the SPDR Gold Shares (GLD) and the iShares Gold Trust (IAU), both boasting a near 100% return between early 2025 and February of this year. 

Lately? Not so much. The price of gold itself has fallen about 6% so far this year and more than 10% since the start of June. It’s always hard to say exactly why the markets do what they do, but the inflation and interest rate outlook clearly isn’t helping gold ETFs at the moment. The consensus today is that rates are likely to either stay flat or rise, and that’s dulling gold’s luster. It’s a pretty bleak outlook for funds that track the spot price of gold, which fell below $4,000 last week for the first time since November 2024. 

It may be high time for advisors to take a fresh look at gold, and help clients best position those assets in their portfolios. “The interest rate outlook is not just a story about inflation, Iran or oil,” Stephen Laipply, global co-head of iShares fixed income ETFs for BlackRock, said on CNBC. “It’s an economic growth and resilience story that’s playing out here.” 

Where Rates May Be Heading 

While the traditional inverse relationship between gold prices and real interest rates is holding strong, there’s also reason to believe gold could recover sooner than later if inflation cools. There’s also the potential for retail ETF inflows and institutional buying to pick up. These factors could help gold climb back toward all-time highs, with ETFs following suit. Unfortunately, the year-over-year change in the Personal Consumption Expenditures print hit a three-year high when it was released last week. 

Gold ETFs are feeling the pain: 

• SPDR Gold Trust has dropped about 6% this year after paring some losses Friday. 
• Most peer funds are in that negative range, including the iShares Gold Trust (IAU) and the Physical Gold Shares ETF (SGOL) from Aberdeen Investments.

A New Pattern? The inverse correlation between interest rates and gold has held for decades, but recent market dynamics have thrown that into question. Particularly since 2022, sustained high inflation and massive sovereign or central bank gold-buying have occasionally caused gold and interest rates to rise in tandem, breaking their traditional seesaw dynamic. Morgan Stanley analysts, among others, have some hope this dynamic could help gold prices recover.