How to Invest in Gold and Gold ETFs in 2025

Gold remains a favored asset for investors seeking a safe haven during economic uncertainty, an inflation hedge, or portfolio diversification. In 2025, gold prices have soared past $3,500 per ounce, driven by geopolitical tensions, trade uncertainties, and central bank purchases. This article explores how to invest in gold, focusing on gold exchange-traded funds (ETFs) as a convenient, cost-effective option, alongside other methods like physical gold, gold mining stocks, and futures.

Why Gold Prices Are Rising in 2025

Gold prices have surged over 30% in the past year, with a 6.4% increase in January 2025 alone, outpacing the S&P 500’s 2.8% return. Key drivers include:

• Geopolitical and Economic Uncertainty: U.S. tariffs on imports from Canada, Mexico, and China have raised fears of inflation and economic slowdown, boosting gold’s appeal as a safe-haven asset.
  
  
• Central Bank Buying: Central banks, notably the People’s Bank of China, purchased over 1,000 tonnes in 2024, with 900 tonnes forecast for 2025.
  
  
• Inflation Hedge: Gold’s ability to retain value during inflationary periods makes it attractive as fiat currencies face pressure.
  
  
• Supply and Demand: High interest rates have reduced gold production, while investor and institutional demand has tightened supply, driving prices higher.

Given this bullish trend, investors are exploring various ways to gain exposure to gold. Below are the primary methods, with a focus on gold ETFs.

Ways to Invest in Gold

1. Gold ETFs: A Convenient and Liquid Option

Gold ETFs are a popular way to invest in gold without owning physical bullion. These funds track gold prices or invest in gold-related assets, offering liquidity, low costs, and ease of trading via brokerage accounts.

Benefits of Gold ETFs

• Liquidity: ETFs trade like stocks on exchanges, allowing buying and selling during market hours, unlike physical gold, which involves dealer spreads.
  
  
• Low Costs: ETFs have expense ratios of 0.10%–0.41%, lower than costs for storing and insuring physical gold. For example, SPDR Gold MiniShares Trust (GLDM) has a 0.10% expense ratio.
  
  
• No Storage Hassles: Physically backed ETFs like SPDR Gold Shares (GLD) or iShares Gold Trust (IAU) store gold in secure vaults, eliminating storage concerns.
  
  
• Diversification: Gold’s low correlation with stocks and bonds reduces portfolio volatility. In 2008, gold rose 2% while the S&P 500 fell 37%.
  
  
• Transparency: ETF prices closely track spot gold prices, ensuring clear pricing.

Types of Gold ETFs

1) Physically Backed ETFs:
These hold physical gold, mirroring spot prices. Examples include:

• SPDR Gold Shares (GLD): The largest gold ETF with $75 billion in assets and 880 metric tons of gold as of November 2024. Expense ratio: 0.40%.
• iShares Gold Trust (IAU): Tracks the LBMA Gold Price with a 0.25% expense ratio.
• Goldman Sachs Physical Gold ETF (AAAU): Offers a 0.18% expense ratio.
• VanEck Merk Gold Trust (OUNZ): Allows redemption of shares for physical gold.

2) Gold Mining ETFs:
These invest in mining companies, which can outperform gold prices but carry risks from management or geopolitical issues. Examples include:

• VanEck Vectors Gold Miners ETF (GDX): Exposure to major miners like Newmont.
• iShares MSCI Global Gold Miners ETF (RING): Delivered over 40% returns in 2025.

3) Leveraged Gold ETFs:
Funds like ProShares Ultra Gold (UGL) aim for double the daily performance of gold prices but are riskier and suited for short-term traders.

Risks of Gold ETFs

• No Income: Gold ETFs rely on price appreciation, unlike dividend-paying stocks or bonds.
  
  
• Tracking Error: Some ETFs may hold cash, slightly deviating from gold prices.
  
  
• Tax Implications: Profits may be taxed as collectibles at up to 28%, not the lower capital gains rate.
  
  
• Volatility: Gold prices can fluctuate, as seen in late 2024 when prices dipped below $2,650 per ounce.

2. Physical Gold: Bars, Coins, and Jewelry

Investing in physical gold involves buying bullion, coins, or jewelry.

• Pros: Offers tangible ownership and potential use in extreme scenarios.
  
  
• Cons: High costs for storage, insurance, and dealer markups. Bank safety deposit boxes incur annual fees.
  
  
• How to Invest: Purchase from reputable dealers or retailers like Costco, ensuring high purity (e.g., 99.5%). Store securely in a bank vault or home safe.

3. Gold Mining Stocks

Investing in companies like Newmont (NEM) offers exposure to gold prices with potential for higher returns due to production growth. However, these stocks face risks from operational challenges, cost inflation, and geopolitical factors.

4. Gold Futures and Options

Gold futures (e.g., COMEX Gold futures) allow speculation on gold prices with leverage, offering high liquidity and no management fees. However, they require rolling contracts forward, incurring costs, and are complex, making them suitable for experienced traders.

Risks and Considerations

• Volatility: Gold prices can drop, as seen in late 2024 when prices fell below $2,650 before rebounding.
  
  
• Opportunity Cost: In high-interest-rate environments, bonds (e.g., 10-year Treasuries at 4.5%) may outperform gold, which offers no income.
  
  
• Overbought Concerns: Some analysts warn gold prices may have peaked, posing risks at record highs.
  
  
• Portfolio Allocation: Limit gold to 5%–10% to avoid overexposure to a non-income asset.

Conclusion

Gold’s 2025 price surge, fueled by economic uncertainty and central bank demand, makes it an attractive option for diversification and inflation hedging. Gold ETFs, particularly GLD, IAU, and GLDM, offer a low-cost, liquid way to invest without physical gold’s hassles. Mining ETFs like GDX or RING provide higher returns with added risks. Allocate 5%–10% of your portfolio to gold, monitor market trends via sources like the World Gold Council, and consult a financial advisor to align with your goals.

Disclaimer: This article is for informational purposes only and does not constitute financial advice. Investing in gold or ETFs involves risks, including potential loss of investment. Past performance does not guarantee future results. Consult a financial advisor before investing.