Gold ETFs: The Ultimate Safe Haven in Times of Geopolitical Tensions and Economic Uncertainty

Gold has reached record highs amidst escalating geopolitical tensions, such as the ongoing Russia-Ukraine conflict, and a significant loss of confidence in traditional safe havens like the U.S. dollar and U.S. Treasuries. Historically, investors have turned to U.S. Treasuries and the dollar during times of crisis, but this time these assets are also under pressure. A rare trifecta of weakness—declines in U.S. stocks, bonds, and the dollar—signaled a broader shift in sentiment in April amid Russia's invasion of Ukraine.

Policy uncertainty, inflation risks, and concerns about the future of the global economy have pushed investors to rethink their strategies. The gold bullion ETF SPDR Gold Trust (GLD) has gained 28% so far this year (as of June 16, 2025), while the U.S. dollar ETF Invesco DB US Dollar Index Bullish Fund (UUP) has retreated 9.5% in the year-to-date frame (as of June 16, 2025). The iShares 20+ Year Treasury Bond ETF (TLT) has lost about 3% so far this year.

A sharp rise in global policy uncertainty has unsettled investors, and the U.S. dollar, long considered overvalued, is starting to unwind. Forecasts point to a potential 10-20% decline against major currencies like the euro and yen over the medium term. The narrowing yield gap between the United States and other major economies is further weakening the dollar’s appeal.

The recent downgrade of the U.S. sovereign credit rating by S&P Global in May 2025 has veered the market’s focus toward Washington's fiscal policy debates. This is especially true since a major stimulus package backed by the Biden administration may increase the fiscal deficit. Many analysts believe that the credit downgrade could eventually lead to higher borrowing costs for both public and private entities, which could further weaken the value of U.S. treasuries as bond prices and yields are inversely related.

With both Treasuries and the dollar underperforming, investors are turning to gold as a more reliable store of value. Unlike financial instruments tied to government or central bank actions, gold holds intrinsic value and is immune to inflation or political instability. “Gold’s key advantage is that it is no one else’s liability,” said Nikos Kavalis, managing director at Metals Focus. “When an investor owns Treasurys, other sovereign bonds, and even currencies, they are ultimately buying into the respective economy.”

Moreover, the U.S. inflation reports are still higher than expected, despite the Russia-Ukraine conflict. The data points may lead the Fed to remain more dovish than expected. If interest rates remain lower, non-yielding assets like gold should outperform.

In conclusion, the latest pivot toward gold reflects a deeper shift in investor sentiment away from traditional U.S. assets towards alternatives like gold and international markets as these pillars are weakening. Investors are diversifying more intentionally to protect their portfolios from potential risks and uncertainties in the global economy.