Gold Climbs as Fed Rate Bets Ease: ETFs That Are Worth Watching

This year has been a challenging one for gold. Rising market expectations that the Fed will maintain a hawkish policy stance have weighed on the precious metal. However, sentiment has improved following weaker-than-expected U.S. jobs data, which has prompted investors to dial back expectations of a near-term Fed rate hike.

Gold responded positively, rising about 1.5% in the latest trading session. The rally has put the precious metal on track for its first weekly gain in five weeks. It snapped a four-week losing streak, with gold prices up around 3.9% over the past five trading sessions. Despite the recent rebound, gold prices have declined 6.8% over the past month, underscoring the pressure the metal has faced amid a higher-for-longer interest rate environment.

According to Reuters, the U.S. economy added only 57,000 nonfarm payrolls in July, reinforcing signs of a cooling labor market and leading investors to largely rule out a September Fed rate hike. Economists surveyed by Reuters had expected the U.S. economy to add 110,000 jobs. Per the CME FedWatch tool, as quoted on the abovementioned Reuters article, the weaker labor market data led traders to reassess the likelihood of a September Fed rate hike to approximately 54%, compared with 66% before the data were released.

A weaker U.S. dollar provided additional support for gold prices. As softer labor market data dampened expectations of a September Fed rate hike, the greenback weakened, making gold more attractive to investors.

Dollar Weakness Bolsters Gold Prices

The greenback’s value tends to move inversely with interest rate adjustments by the Fed. Interest rate cuts by the Fed make the dollar less attractive to foreign investors, as this weakens 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. Per TradingView, the U.S. Dollar Index (DXY) has fallen 0.73% over the past five trading sessions and around 0.1% over a single trading session.

While the Fed’s policy path will likely drive gold’s near-term performance, longer-term structural trends paint a more constructive picture. Central banks are increasingly expected to diversify their foreign exchange reserves by reducing exposure to the U.S. dollar and steadily increasing their gold holdings (Read: What Lies Ahead for the U.S. Dollar? ETFs That Investors May Consider).

If this trend persists, it could weaken structural demand for the greenback and provide a durable tailwind for gold prices, supporting a long-term buy-and-hold strategy.

Central Bank Demand Continues to Support Gold

According to the abovementioned Reuters article, data from the World Gold Council showed that central banks purchased a net 41 metric tons of gold in May.

Steady buying by major economies continues to anchor gold prices, helping limit downside even during sharp pullbacks. Central bank demand is set to remain a structural pillar supporting the precious metal’s long-term investment case.

How to Approach Gold ETFs

The precious metal continues to serve as an important portfolio diversifier and hedge for investors across different investment themes, especially during periods of elevated market volatility and economic uncertainty.

With weaker-than-expected U.S. jobs data reducing expectations of a September Fed rate hike, gold has found near-term support. However, this does not necessarily rule out additional rate hikes later this year or even in early 2027. A hawkish Fed remains a key headwind for non-yielding assets such as gold.

While the latest labor market data offers a near-term tailwind, gold’s price trajectory over the coming year will likely depend on the Fed’s evolving policy stance and the broader macroeconomic environment. While gold’s short-term performance will likely remain sensitive to the Fed’s policy path, the long-term investment case for gold remains intact.

In fact, the recent pullback could present an attractive entry point for investors seeking exposure to gold. Although the precious metal has declined roughly 6.8% over the past month, such weakness may be viewed as a buying opportunity rather than a setback. Investors should consider gradually building exposure through gold ETFs using a disciplined buy-the-dip approach.

Against the current macroeconomic backdrop, a long-term, passive investment approach may be the most prudent way to build portfolio exposure to the precious metal.

Gold ETFs to Watch for Long-Term Exposure

Below, we have highlighted a few funds in which investors can increase their allocation to gain greater exposure to gold.

Investors can consider SPDR Gold Shares GLD, iShares Gold Trust IAU, SPDR Gold MiniShares Trust GLDM and iShares Gold Trust Micro IAUM to increase their exposure to the yellow metal.

With a one-month average trading volume of 8.36 million shares, GLD is the most liquid option, offering investors easier entry and exit while minimizing the risk of significant price fluctuations, ideal for active trading strategies.

GLD has gathered an asset base of $130.09 billion, the largest among the other options. Regarding annual fees, GLDM and IAUM are the cheapest options, charging 0.10% and 0.09%, respectively, which makes them more suitable for long-term investing.

Gold Miner ETFs Worth a Closer Look

These ETFs focus on gold miners, usually magnifying gold’s gains and losses. They provide access to the gold mining industry, not the commodity’s price.

Investors can consider VanEck Gold Miners ETF GDX, Sprott Gold Miners ETF SGDM and Sprott Junior Gold Miners ETF SGDJ.

With a one-month average trading volume of 26.57 million shares, GDX is the most liquid option. GDX has gathered an asset base of $22.76 billion, the largest among the other options. Regarding annual fees, SGDM is the cheapest option, charging 0.46%.

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