Why Investors Are Turning to Gold Amid Market Uncertainty

The U.S. Stock market has had a challenging start to 2025. The S&P 500 recently entered a correction, and while it quickly bounced back, the index remains below its early January levels. In contrast, the SPDR Gold Trust (NYSEMKT: GLD) has surged 15% this year and 40% over the past 12 months.

The SPDR Gold Trust is an exchange-traded fund (ETF) that invests directly in gold bullion. This allows investors to gain exposure to gold without having to physically own it.

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Gold has been a significant asset for centuries, yet many individual investors overlook gold ETFs like the SPDR Gold Trust. What has driven the recent interest in gold, and could investing in the SPDR Gold Trust lead to substantial wealth?

Here is what you need to know.

Reasons for Gold’s Recent Popularity

Gold is a unique element and a precious metal. It is visually appealing, does not corrode, and has maintained its value in society for thousands of years. While the world’s gold supply slowly increases as new discoveries are made, gold remains limited. This scarcity contributes to its reputation as a reliable store of value.

Due to its historical importance, gold often attracts investors during uncertain times.

Currently, various global issues are causing investor anxiety. Potential tariffs, trade disputes, political elections, and scrutiny over U.S. government spending and debt have all weighed heavily on the market in the past year. This can be observed through the VIX index, which measures expected market volatility. The VIX started spiking more frequently around August 2024:

VIX data by YCharts

Market sentiment can fluctuate, but these concerns significantly affect short-term prices.

Monetary Expansion and Gold’s Long-Term Trends

The price of gold is priced in U.S. dollars, a fiat currency. Over time, increased government spending and monetary policy have expanded the U.S. money supply. Since 2001, the U.S. has operated at a budget deficit. Unique circumstances, such as the COVID-19 pandemic, have prompted emergency monetary policies that added significant amounts of money to the economy.

This increase in the money supply can lead to inflation, pushing up prices for various assets, including stocks, real estate, and precious metals. A long-term correlation can be seen between the U.S. money supply and gold prices:

Gold Price in US Dollars data by YCharts

While gold prices are subject to short-term market sentiment, the growing money supply has consistently supported gold’s long-term value. Unlike stocks, gold is a tangible asset rather than a business with earnings growth. Despite this, gold has proven to be a solid investment, maintaining competitiveness with the S&P 500 since the SPDR Gold Trust’s launch in 2004:

GLD data by YCharts

Can This Gold ETF Create Millionaires?

Investors likely don’t need to worry about gold losing value as a societal asset. As one of the longest-standing investments, it shows no signs of losing appeal. However, can an investment in a gold ETF like the SPDR Gold Trust yield significant wealth? While not impossible, it seems less likely. The S&P 500 remains a dominant wealth-building tool, making it notable that the SPDR Gold Trust has remained competitive over two decades.

However, uncertainty over future government and monetary policies makes gold’s market prices unpredictable. Unlike stocks, gold lacks earnings growth, positioning it as a more defensive investment. Historically, the S&P 500 has outperformed gold in terms of investment returns.

Investors should consider gold as a complementary asset within a diversified portfolio. It offers stability during unstable times, but it functions best as a supportive investment rather than a primary focus.

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*Stock Advisor returns as of March 18, 2025

Justin Pope has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.