Gold has risen by approximately 27% in 2025, with the spot price for 10 grams of gold on the MCX reaching Rs 97,192 as of May 7, 2025. But what’s driving this surge, and why should investors consider gold ETFs?
Key Factors Driving Gold Prices Up
1. Donald Trump’s Protectionist Policies
President Donald Trump’s economic policies, especially his tariffs, have created global economic uncertainty. If trade negotiations fail, the potential for steep reciprocal tariffs could push the U.S. into a recession, which would have global ripple effects, benefiting gold. Historically, gold performs well in times of uncertainty.
2. Rising Geopolitical Tensions
Geopolitical conflicts, including the Russia-Ukraine war, strained U.S.-China relations, and tensions between China and Taiwan, are heightening global instability. The Reserve Bank of India (RBI) and the International Monetary Fund (IMF) have both highlighted these risks, reinforcing gold’s safe-haven status.
3. Rising Global Public Debt
Global public debt has been rising, with many countries on track to reach or exceed 100% of GDP by the decade’s end. If economic growth slows, gold could be seen as a safer bet for investors, as it retains value during financial instability.
4. Weakening US Dollar
The US Dollar Index has weakened, largely due to Trump’s policies and recession fears. As the dollar struggles, gold is becoming more appealing to investors looking for stable value. Historically, gold has performed better than equities or debt during periods of economic volatility.
Gold: A Safe Haven in Times of Crisis
During global crises, such as the COVID-19 pandemic, the Russia-Ukraine war, and the 2023 Hamas-Israel conflict, gold has proven to be a reliable store of value. Central banks and smart investors are increasingly turning to gold, particularly through gold ETFs, which have seen a surge in inflows. This growing interest is one of the key drivers of gold’s rising price.
Gold ETFs: A Smart Way to Invest in Gold
Gold ETFs are exchange-traded funds that invest directly in gold, aiming to match the price of gold. These funds are a cost-effective way for investors to gain exposure to gold without physically holding it. Gold ETFs are backed by 0.995 fineness of physical gold, stored in vaults by an appointed custodian, and periodically valued and insured according to regulatory guidelines.
How Gold ETFs Work
Gold ETFs are highly liquid, and transactions are executed at the prevailing Net Asset Value (NAV), closely tracking gold prices. To invest in gold ETFs, you need a demat and trading account, and you can place an order through a broker, similar to purchasing shares.
Gold ETFs offer a hassle-free alternative to buying and selling physical gold, and they provide a convenient, low-cost way to benefit from the price appreciation of gold.
Why You Should Consider Gold ETFs
Given the global uncertainties and rising gold prices, allocating 10-15% of your portfolio to gold ETFs can be a smart long-term investment strategy. Investing in gold through ETFs allows you to enjoy the benefits of gold ownership without the complexities of physical gold storage or the risks of counterparty exposure associated with other financial assets.
