Gold ETF Rally Gains Momentum: Will It Sustain?

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Gold-bullion-based exchange-traded fund (ETF) SPDR Gold Trust (GLD - Free Report) gained 7.7% last week, due to macroeconomic uncertainty and a weaker-than-expected July jobs report that reduced expectations for a Federal Reserve rate hike this year.

Note that the latest rally has also been supported by increased buying from Chinese investors and continued inflows into gold ETFs. UBS analysts are bullish on gold, arguing that the precious metal has room to extend its recent rally, as quoted on Yahoo Finance.

UBS Chief Investment Officer Ulrike Hoffmann-Burchardi and her team said gold's rally has fundamental support and should see prices rise toward $5,000 an ounce in the first half of 2027, per the above-mentioned source.

Gold is relatively flat year to date after soaring more than 65% in 2025. Below we highlight a few factors that can support the ongoing rally.

U.S.-Japan Yen Move Supports Gold

Recent efforts by the United States and Japan to stabilize the yen have also eased concerns about a potential sell-off in U.S. Treasuries. A sharp Treasury sell-off could push bond yields higher, typically creating headwinds for non-yielding assets like gold.

By reducing the need for Japan to sell U.S. Treasuries, the intervention may help limit upward pressure on Treasury yields, offering short-term support for gold prices.

Central Bank Buying Adds Support

Continued purchases by central banks are another key pillar of the bullish gold outlook. Strong official-sector demand could provide a floor for prices even if short-term market volatility persists.

Central bank gold demand rebounded sharply in Q2 of 2026. According to the World Gold Council, central banks and institutions bought a record 289 tons during the quarter – a record high for a second quarter and up 62% year over year, as quoted on centralbanking.com. The National Bank of Poland was the largest buyer.

Fed Policy to Remain Accommodative Ahead?

Gold has declined since the Iran war broke out in late February. Higher oil prices lifted inflation, which is why markets began pricing in a more hawkish Federal Reserve policy path, which could make bonds more attractive and weigh on gold prices.  

However, UBS expects inflation to gradually moderate, allowing the Fed to keep interest rates steady this year before resuming monetary easing in 2027, as quoted on Yahoo Finance. Lower policy-rate expectations could reduce real yields and weaken the U.S. dollar, creating a more favorable environment for gold and boosting investment demand.

Note that the two-year U.S. Treasury bond yield slumped 6 bps to 4.19% on Aug. 7, from the day before, following weak jobs data. Benchmark 10-year U.S. Treasury yield slipped to 4.65% from 4.69% recorded a day before. Thanks to the drop, the bond yields GLD ETF added 2.3% on Aug. 7.  

Inside ETF Inflows

Global investors returned to gold ETFs in July, resulting in $3.0 billion in net inflows, led by European funds. Global gold ETFs’ AUM rose 1% to $530 billion, and their collective holdings recovered by 23 tons to 4,068 tons (remaining below the record high of 4,176 tons reached on Feb. 27), per World Gold Council.

Year to date, global gold ETFs have attracted $11 billion in inflows, adding 39 tons to holdings. Asian-listed funds led global inflows, followed by European funds, while North America remained in net outflow territory.

Bottom Line

The combination of likely Fed easing, lower real yields, dollar weakness, ETF inflows and sustained central bank buying could support the precious metal's next leg higher. Hence, investors can keep track of iShares Gold Trust (IAU - Free Report), SPDR Gold Minishares Trust (GLDM - Free Report), abrdn Physical Gold Shares ETF (SGOL - Free Report), iShares Gold Trust Micro ETF (IAUM - Free Report), and VanEck Merk Gold ETF (OUNZ - Free Report).