Gold ETFs have democratized gold investing. Before their introduction, buying and storing physical gold was the only way for most individual investors to get direct gold exposure. Today, anyone with a brokerage account can buy gold exposure in seconds, at low cost, with no storage concerns.
How Gold ETFs Work
A physically-backed gold ETF is straightforward:
- The ETF sponsor purchases and stores physical gold in insured, audited vaults (typically major bank custodians)
- Shares are issued to investors, each representing a fraction of an ounce of gold
- Investors buy and sell shares on stock exchanges like any other publicly traded security
- The share price tracks the gold spot price minus the annual expense ratio
When you buy 100 shares of IAU, you own a claim to approximately 1.88 oz of physical gold held at a custodian bank (as of March 2026 — see the IAU Form 10-Q filed with the SEC).
The Major Physically-Backed Gold ETFs
| ETF | Ticker | Expense Ratio | Gold Per Share | Custodian | AUM |
|---|---|---|---|---|---|
| SPDR Gold Shares | GLD | 0.40% | 0.0919 oz | HSBC Bank (London) | ~$57B |
| iShares Gold Trust | IAU | 0.25% | 0.0188 oz | JPMorgan Chase | ~$28B |
| SPDR Gold MiniShares | GLDM | 0.10% | 0.0198 oz | ICBC Standard Bank | ~$8B |
| abrdn Physical Gold Shares (SGOL) | SGOL | 0.17% | 0.00953 oz | JP Morgan (Zurich) | ~$3B |
| Sprott Physical Gold Trust | PHYS | 0.35% | variable | Royal Canadian Mint | ~$7B |
Gold-per-share figures are as of March 2026, per each fund’s SEC Form 10-Q (GLD, IAU, GLDM, SGOL). The gold backing each share declines slowly over time as the sponsor’s fee is paid out of the trust’s gold, so these figures drift lower year to year.
GLD vs. IAU vs. GLDM: Which Is Best?
GLDM — Best for Buy-and-Hold
Lowest expense ratio at 0.10%. Ideal for long-term investors building a core portfolio position. Slightly less liquidity than GLD, but still very liquid with billions in AUM.
GLD — Best for Active Traders
Preferred by institutional traders and options market participants. Highest liquidity and deepest options market of any gold ETF. Expense ratio of 0.40% is the tradeoff.
IAU — Best All-Rounder
Splits the difference — lower cost than GLD at 0.25%, highly liquid, very large AUM. A solid middle-ground choice for most investors.
PHYS — Best for Redemption Option
Unique feature: certain investors can request redemption in physical gold directly from the Royal Canadian Mint, partially bridging the gap between ETF convenience and physical ownership.
✓ Pro Tip
For buy-and-hold investors, GLDM’s 0.10% expense ratio saves roughly $3,000 over 10 years compared to GLD on a $100,000 position. The liquidity difference rarely matters for long-term holders.
Cost Comparison Over Time
The expense ratio compounds significantly over time:
| Holding Period | $100,000 in GLDM (0.10%) | $100,000 in GLD (0.40%) | Cost Difference |
|---|---|---|---|
| 1 year | $100 | $400 | $300 |
| 5 years | $502 | $2,008 | $1,506 |
| 10 years | $1,005 | $4,029 | $3,024 |
| 20 years | $2,020 | $8,157 | $6,137 |
Assumes flat gold price; actual difference larger with appreciation.
Gold ETF Tax Treatment
This is the most important and often overlooked aspect of gold ETF investing.
Physical gold ETFs are taxed as collectibles by the IRS. This means:
- Long-term capital gains (held >1 year): taxed at a maximum 28% rate
- Compare to standard long-term equity rates: 0%, 15%, or 20% depending on income
- For a high-income investor, this could mean paying 28% vs. 20% — a meaningful difference
⚠ Warning
Many investors are surprised by gold’s tax treatment at selling time. Unlike stocks, gold ETF gains held over a year are taxed at the 28% collectibles rate, not the favorable 15-20% long-term capital gains rate.
Exceptions:
- Gold held in an IRA (Traditional or Roth): no current-year tax; grows tax-deferred/free
- Gold futures ETFs (like UGL): taxed under the 60/40 rule — 60% long-term, 40% short-term
- Gold miner ETFs (GDX, GDXJ): taxed as ordinary equity, not collectibles
Gold ETFs vs. Physical Gold: Key Differences
| Factor | Gold ETF | Physical Gold |
|---|---|---|
| Ownership | Share/claim | Direct ownership |
| Counterparty risk | Custodian bank | None |
| Storage cost | Embedded in expense ratio | Additional (safe, vault, insurance) |
| Liquidity | Instant | Moderate (hours to days) |
| Crisis protection | Limited | Maximum |
| Divisibility | Very high (fractional shares) | Limited |
| IRA compatible | Standard IRA or Gold IRA | Gold IRA only |
| Collectibles tax | Yes | Yes |
Using Gold ETFs in Practice
For a Core Portfolio Holding
Most investors use IAU or GLDM for a long-term portfolio allocation. Simply buy and hold as part of your regular portfolio. Set target allocation (e.g., 10%) and rebalance annually.
For Tactical Allocation
GLD is preferred by active traders for its liquidity and options market depth. It’s easier to implement covered calls or protective puts on GLD than on smaller ETFs.
In an IRA
Holding a gold ETF in a traditional 401k or IRA is tax-efficient: no collectibles tax applies to gains within the account. This is often the most tax-efficient way to hold gold — superior to a Gold IRA which adds significant custodian fees.
★ Important
A gold ETF in a standard Roth IRA gives you the same tax-free growth as a Gold IRA but at a fraction of the cost. For most investors, this is the most tax-efficient way to hold gold.
Gold Mining ETFs vs. Gold Bullion ETFs
Mining ETFs (GDX, GDXJ) are NOT the same as gold bullion ETFs:
| Aspect | GLD/IAU/GLDM | GDX/GDXJ |
|---|---|---|
| What it tracks | Gold spot price | Gold mining company stocks |
| Leverage to gold | ~1× | ~2–3× (both ways) |
| Non-gold risks | Minimal | Currency, management, operational |
| Dividends | None | Some companies pay dividends |
| Tax treatment | Collectibles (28%) | Standard equity rates |
Mining ETFs are higher-risk, higher-potential-reward equity investments. Bullion ETFs are closer to holding the metal itself.
ℹ Note
Gold mining ETFs (GDX, GDXJ) are taxed as regular equities at the 15-20% long-term rate, not the 28% collectibles rate. If you hold gold in a taxable account, mining ETFs actually have a tax advantage over bullion ETFs.
Where to Buy Gold ETFs
Any brokerage account:
- Fidelity, Schwab, Vanguard, TD Ameritrade
- Robinhood, Webull (for smaller investors)
- Most employer 401(k) plans (check fund options; you may only have access to select ETFs)
Commissions are generally zero at major brokers. Look at the bid-ask spread when placing orders — use limit orders during volatile markets.
Further Reading
- Forms of Gold Investment — Comparison of all gold investment vehicles
- Portfolio Allocation Strategies — How to size your gold ETF holding
- Physical Gold — The complementary approach to ETF ownership