Market Analysis2025-09-27

Gold Price Surge Puts GLD ETF in Spotlight as Safe-Haven Demand Rises

Gold prices have surged amid geopolitical risks and inflation concerns, driving strong performance in the GLD ETF. Investors are reassessing gold's role as a defensive asset in their portfolios.

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With gold prices breaking through $2,050 per ounce to hit their highest level of the year, the GLD (SPDR Gold Shares) ETF is drawing significant investor attention. A combination of geopolitical instability and inflation concerns has fueled a sharp surge in demand for gold, the traditional safe-haven asset. Investors are revisiting the optimal allocation to gold and their rebalancing strategies within their portfolios.

GLD ETF's Recent Performance

GLD has risen 6.3% over the past month, significantly outpacing the lackluster performance of equity and bond markets. In particular, a weaker dollar and declining real interest rates have served as the primary drivers of gold's price appreciation. GLD's physically-backed structure allows it to track the gold price with near-perfect accuracy, and its relatively low expense ratio of 0.40% makes it highly accessible. Experts project that GLD's upward trend is likely to continue for the time being, supported by increased gold purchases from central banks worldwide.

Gold's Role in a Portfolio

Gold exhibits a low correlation with equities and bonds, making it an excellent diversifier within a portfolio. In particular, during market crises, gold can act as a hedge by partially offsetting declines in stock prices. When using an asset allocation calculator, it is common practice to set gold's allocation at around 5–10%, with higher allocations often considered for older investors. Holding GLD alongside bond ETFs like AGG can significantly enhance a portfolio's overall defensive positioning.

Risks and Limitations of Gold Investing

Gold does not generate dividends or interest income, which means its long-term returns can be lower than those of equities. Additionally, gold prices carry the risk of declining during periods of dollar strength or rising real interest rates. For GLD specifically, ongoing storage costs can gradually erode returns over long holding periods. For these reasons, it is important to limit gold to 5–15% of the total portfolio and to periodically review the allocation using a rebalancing calculator.

Timing and Strategy for Gold Investing

Gold typically performs well during periods of heightened economic uncertainty. In the current environment, where geopolitical risks and inflation concerns coexist, temporarily increasing GLD's weighting in a portfolio may be worth considering. However, rather than relying on market timing, a more prudent approach is to maintain a target allocation through regular rebalancing. In particular, after a sharp run-up in gold prices, a strategy of taking partial profits and redistributing into other asset classes can be an effective way to stay diversified.

Conclusion

The surge in gold prices serves as yet another reminder of the importance of safe-haven assets. While investing in gold through the GLD ETF is a useful tool for bolstering portfolio resilience, maintaining an appropriate weighting is key. Use an asset allocation calculator and a rebalancing calculator to determine the right gold allocation for your circumstances and to build a well-balanced portfolio.

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