For some novice investors, gold can be a frustrating asset. There are examples of it not living up to its reputation as a hedging asset over shorter holding periods. For example, the largest gold-backed ETF finished slightly lower in 2022, when inflation surged and stocks and bonds tumbled.
Looked at another way, while ownership of physical gold doesn’t include the benefit of dividend or interest payments, bullion does have credibility as long-term asset. That status could increase the allure of ETFs such as the WisdomTree Efficient Gold Plus Gold Miners Strategy Fund (GDMN ).
The actively managed GDMN, which features exposure to gold futures and shares of precious metal miners, has proven its worth as a long-term holding. The ETF debuted in December 2021, and over the past three years, it more than doubled, easily beating traditional bullion-backed ETFs along the way. So while gold may not always provide the short-term hedging capabilities investors think they’re signing up for, the yellow metal is a valid long-term store of value. That supports the case for GDMN.
GDMN Appealing as Long-Term Holding
For patient investors, an ETF like GDMN makes sense. That’s because macroeconomic factors are increasingly supportive of the gold as a store of value thesis.
“This characteristic is particularly important today, as investors wrestle with both record government debt and wrenching changes in international trade. The fact that the dollar is also under significant pressure only adds to the argument,” according to BlackRock.
To its credit, gold is proving its mettle as a short-term buffer in 2025. It is outperforming an array of other assets as investors grapple with geopolitical volatility, unprecedented U.S. trade policy, and ballooning government debt, among other issues. Regarding the issue of government debt, it’s one that could add to the long-term case for gold and GDMN.
“Given the size of U.S. debt markets and the dollar’s reserve currency status, gold prices have historically had a strong relationship with the level of U.S. public debt. As U.S. debt-to-GDP grows, gold typically follows,” added BlackRock. “More importantly, in the past the relationship between gold and government debt has been non-linear. In other words, gold price gains have tended to accelerate as public debt has approached and now surpassed 100% of GDP.”
Key Long-Term Buffering Traits
While GDMN’s recent performance has been undoubtedly impressive, investors should take the pragmatic approach. That is to view gold not as a get-rich-quick asset, but one that offers important long-term buffering traits.
“While the yellow metal has already had a stellar run, looking further out, heightened policy uncertainty and record debt levels suggest keeping some tucked away in your portfolio,” concluded BlackRock.
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