Gold ETFs Set to Soar on September Fed Rate Cuts

Economic Landscape and Gold Prices - The current economic environment is characterized by rising uncertainty and fragile investor confidence, with comments from Fed Chair Jerome Powell, geopolitical tensions, and increasing inflation expectations contributing to a rally in gold prices [1][3] - Strong fundamental indicators suggest that gold's gains could extend into late 2025 and 2026, making a case for increased portfolio allocation towards gold [1] Interest Rate Expectations - Powell's recent speech indicated a potential interest rate cut, which is expected to boost gold prices as the U.S. dollar typically weakens with rate cuts, making gold more attractive [3][4] - The CME FedWatch tool shows an 87.3% likelihood of a rate cut in September, up from 75% prior to Powell's speech, with even higher probabilities for subsequent months [4] Dollar Value and Gold Demand - A weaker U.S. dollar, which has fallen approximately 7.79% over the past six months, is expected to further lift gold prices as it increases demand for gold among foreign buyers [5][6] Inflation Expectations - Rising inflation expectations, with a 12-month forecast increasing to 4.9% in August from 4.5%, and long-term expectations rising to 3.9% from 3.4%, make gold an attractive hedge against inflation [8][7] Central Bank Activity - Central banks are increasingly strengthening their gold reserves, which may drive up gold prices amid ongoing geopolitical and economic instability [9] Investment Strategies - Investors are encouraged to adopt a long-term passive investment strategy in gold, viewing it as a hedge against market volatility, and to consider a "buy-the-dip" approach [11] - Recommended ETFs for gold exposure include SPDR Gold Shares (GLD), iShares Gold Trust (IAU), and others, with GLD being the most liquid option [12][13] Performance of Gold ETFs - GLD has an asset base of $102.67 billion, the largest among gold ETFs, and has gained about 35.6% over the past year, while GLDM and IAU are the cheapest options for long-term investing [13]