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Gold ETFs pump double-digit gains amid hopes of a rate hike pause

Top 5 Gold ETFs up 10% since March amid hopes of a rate hike pause

Gold-related exchange-traded funds (ETFs) rose 10% in the past two months, outperforming the benchmark stock market index SPX’s gains of 3% during that period. 

Bloomberg ETF analyst Eric Balchunas said on May 9 the biggest gold ETF, SPDR Gold Shares (GLD) is “within a hair” of its all-time high of $193.89 it reached in August 2020 during the coronavirus pandemic. GLD surged nearly 12% over the past two months to $188.52, and around 10% year-to-date. 

Other major gold-related ETFs, including iShares Gold Trust (IAU) and SPDR Gold MiniShares Trust (GLDM), also saw meaningful gains, both surging 11.6% in the last two months. Since the start of the year, IAU and GLDM have climbed 10% and 10.1%, respectively. 

Why are gold ETFs rising?

The significant resurgence in gold ETFs comes amid the latest jump in gold prices. A combination of factors, most notably the rising demand for safe-haven assets amid recession fears and the recent banking turmoil, fueled the bullion’s rise. 

The yellow metal climbed 12% since dipping to as low as $1809 on March 8. At press time, gold was trading at $2028.59, up around 11.2% year-to-date. Compared to its current price, gold is down by just 2.2% from its historical high of $2,075. 

Other factors, such as hopes of a halt in interest rate hikes, lower Treasury yields, and a weakening dollar, also contributed to gold’s strength. 

Recent US economic data pointed to a slowdown in the world’s largest economy, raising hopes among investors that the Fed is close to halting its tightening cycle. 

Gold is highly sensitive to changes in interest rates, which have been raised by the Fed non-stop since March 2022. A pause or slowdown in the pace of rate increases is expected to lift gold prices even higher. 

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