Last updated: July 2026
This article is for informational purposes only and is not investment advice. See our full Disclaimer for details.
Gold has been treated as a store of value for thousands of years, long before there was a stock market to compare it to. Gold ETFs are a much newer idea — the first major U.S. gold ETF, SPDR Gold Shares (GLD), launched in 2004 — but they solved a real problem: buying, storing, and insuring physical bullion is inconvenient and expensive for an individual investor. A gold ETF lets you get price exposure to gold through a normal brokerage account, without a home safe or a vault rental.
This guide covers how gold ETFs actually work, compares the major physically-backed funds on the market, and walks through a tax quirk specific to this asset class that catches a lot of investors off guard.
New to ETFs generally? Start with our What Is an ETF? guide for the basics.
How Gold ETFs Actually Work
Not all “gold ETFs” work the same way. There are three structurally different categories, and mixing them up is one of the most common mistakes new gold investors make.
Physically-backed gold ETFs (GLD, IAU, GLDM, and others) hold actual gold bullion in secure vaults, and each share represents a fractional claim on that physical gold. These funds are designed to track the spot price of gold as closely as possible, minus the fund’s expense ratio.
Gold mining ETFs (like GDX) don’t hold physical gold at all — they hold shares of gold mining companies. This is a meaningfully different investment: you’re exposed to a mining company’s operational performance, debt, management decisions, and broader stock market conditions, in addition to the price of gold itself. Mining stocks have historically been more volatile than the price of gold directly, since company-specific and stock-market risk layers on top of commodity price risk.
Leveraged and inverse gold ETFs (such as funds designed to move 2x or 3x gold’s daily price, or move in the opposite direction) are built for short-term trading, not long-term holding. As with leveraged funds in other asset classes, daily rebalancing can cause their returns to diverge significantly from a simple multiple of gold’s actual long-term price move — these are a fundamentally different risk category from a plain physically-backed gold fund.
This article focuses primarily on physically-backed gold ETFs, since they’re what most people mean when they search for “gold ETF,” but it’s worth knowing these other categories exist under the same general label.
Quick Comparison: Major Physically-Backed Gold ETFs
| ETF | Issuer | Expense Ratio | Approx. AUM | Custody Location |
|---|---|---|---|---|
| GLD | State Street (SPDR) | 0.40% | $170B+ | London (HSBC) |
| IAU | BlackRock (iShares) | 0.25% | ~$80B | London |
| GLDM | State Street (SPDR) | 0.10% | ~$25B+ | London (HSBC) |
| IAUM | BlackRock (iShares) | 0.09% | Smaller, growing | London |
| SGOL | abrdn | 0.17% | Multi-billion | Zurich, Switzerland |
| BAR | GraniteShares | 0.17% | ~$1.2B | Vaulted (ICBC Standard Bank) |
Figures are approximate and change regularly — gold ETF fees and AUM have shifted noticeably as issuers compete on price. Always confirm current expense ratios, AUM, and custody details on the issuer’s official fund page before investing.
1. SPDR Gold Shares (GLD) — Largest and Most Liquid
GLD is the original and still the largest gold ETF by assets, with well over $170 billion under management as of 2026. Its scale brings the deepest liquidity and by far the most developed options market of any gold ETF, which matters most to institutional investors and active traders moving large positions.
Worth knowing: GLD’s 0.40% expense ratio is meaningfully higher than several newer competitors offering essentially the same physical gold exposure. Much of GLD’s continued dominance in assets reflects institutional inertia — large funds and pension plans that specifically need GLD’s superior liquidity and options market — rather than it being the cheapest way for an individual long-term holder to own gold.
Best for: Active traders and investors who specifically need maximum liquidity or access to a deep options market.
2. iShares Gold Trust (IAU) — Balanced Cost and Liquidity
IAU sits in the middle of the cost spectrum, with a 0.25% expense ratio — cheaper than GLD, though not as low as GLDM or IAUM. It still offers excellent liquidity and tight trading spreads, making it a reasonable middle-ground choice for investors who want lower ongoing costs than GLD without sacrificing much in trading flexibility.
Worth knowing: IAU and GLD have historically tracked gold’s price almost identically, with the expense ratio being the primary meaningful difference between them for a long-term holder.
Best for: Buy-and-hold investors who want strong liquidity but don’t need GLD’s institutional-grade options market.
3. SPDR Gold MiniShares (GLDM) — Lowest-Cost Major Option
GLDM was launched specifically to compete on price, and at a 0.10% expense ratio, it’s become the default recommendation for long-term, buy-and-hold gold investors in most comparisons. It uses the same London-based custody arrangement as GLD, and its lower per-share price makes it easier to size a position precisely — useful for dollar-cost averaging into a gold allocation gradually.
Worth knowing: GLDM generally trades with a wider bid-ask spread than GLD, since it has less trading volume. For long-term holders making infrequent trades, that’s a minor consideration; for frequent traders, it’s more relevant.
Best for: Long-term, cost-conscious investors making infrequent trades — the most commonly recommended “default” gold ETF for buy-and-hold purposes.
4. iShares Gold Trust Micro (IAUM) — Ultra-Low-Cost Alternative
IAUM undercuts even GLDM slightly, with one of the lowest expense ratios among major physically-backed gold funds. Like GLDM, it’s designed with a smaller share price and long-term holders in mind rather than active trading.
Worth knowing: The fee difference between IAUM and GLDM is small in absolute terms, but it illustrates how competitive the low-cost end of the gold ETF market has become — there’s now very little reason for a long-term holder to default to GLD’s 0.40% fee purely out of brand familiarity.
Best for: Fee-sensitive, long-term holders comparing every basis point against GLDM.
5. abrdn Physical Gold Shares (SGOL) — Geographic Custody Diversification
SGOL’s main differentiator isn’t cost — its 0.17% expense ratio is competitive but not the cheapest — it’s custody location. Unlike GLD, IAU, GLDM, and IAUM, which all vault their gold in London, SGOL stores its gold in Zurich, Switzerland.
Worth knowing: Some investors specifically value diversifying gold custody across more than one jurisdiction, rather than concentrating all their gold holdings under a single country’s regulatory and banking system. This is a fairly specialized consideration — most investors won’t need it, but it’s the primary reason SGOL exists as a distinct option in a market otherwise dominated by cost competition.
Best for: Investors who specifically want geographic custody diversification alongside their gold price exposure.
6. GraniteShares Gold Trust (BAR) — Smaller Fund, Competitive Fee
BAR ties SGOL on expense ratio at 0.17%, using a different custodian (ICBC Standard Bank) than the larger funds above. Its asset base is considerably smaller than GLD, IAU, or GLDM, which is generally fine for individual investors but worth being aware of if you’re evaluating fund longevity and liquidity for a large position.
Best for: Cost-conscious investors comfortable with a smaller, less established fund in exchange for a competitive fee.
What About Gold Mining ETFs (GDX)?
Funds like VanEck Gold Miners ETF (GDX) take a completely different approach: instead of holding physical gold, they hold shares of gold mining companies. This introduces a form of leverage to gold price movements — mining company profits are sensitive to the gap between their production costs and the price of gold, so a mining stock can move more sharply than gold itself in either direction. Mining ETFs also carry stock-specific risks (management decisions, operational issues, debt levels) that a physically-backed gold ETF simply doesn’t have. This makes GDX a fundamentally different investment from GLD or IAU, not just a “leveraged version” of the same thing.
Why Investors Hold Gold: The Core Argument
Gold’s role in a portfolio is generally discussed in terms of diversification and “safe haven” behavior rather than growth. Historically, gold has often (though not always) moved somewhat independently of stocks — sometimes holding up or even rising during periods of stock market stress, inflation concerns, or currency weakness. That’s the primary reason many investors hold a small gold allocation: not necessarily to maximize returns, but to potentially reduce overall portfolio volatility by holding an asset that doesn’t always move in the same direction as stocks and bonds at the same time.
It’s worth being direct about the limits of this argument: gold’s diversification benefit isn’t guaranteed or constant — its correlation with stocks has shifted across different historical periods, and gold itself can and does experience significant price declines. It also generates no income, dividend, or interest, meaning its entire potential return comes from price appreciation alone, unlike a dividend stock or bond.
An Important Tax Quirk: Gold ETFs Are Taxed as Collectibles
This is one of the most commonly overlooked details about physically-backed gold ETFs, and it’s different from how most other ETFs on this site are taxed.
Under current IRS rules, physically-backed gold ETFs are generally treated as “collectibles” for tax purposes — similar to how directly owned physical gold, art, or coins are taxed. That means long-term capital gains on these funds can be taxed at a maximum federal rate of 28%, rather than the more favorable long-term capital gains rates (0%, 15%, or 20%) that apply to a stock ETF like VOO or SCHD, regardless of how long you’ve held the position.
This is a meaningful, often-overlooked difference. An investor holding GLD or IAU for ten years and eventually selling at a substantial profit could face a notably higher tax rate on that gain than an investor holding a stock index fund for the same period with the same dollar gain. This is general tax information, not personalized advice — a tax professional can confirm current collectibles tax treatment and how it applies to your specific situation, including whether holding a gold ETF inside a tax-advantaged account like an IRA changes this calculation for you.
Risks of Investing in Gold ETFs
- No income generation. Unlike dividend stocks or bonds, gold produces no yield — your only potential return is price appreciation.
- Price volatility. Gold can and does experience significant price swings and multi-year periods of decline, despite its “safe haven” reputation.
- Higher tax rate on long-term gains, as covered above — a structural disadvantage relative to equity ETFs held long-term.
- Custody and counterparty risk. You’re relying on the fund’s vault custodian to securely hold and accurately account for the physical gold backing your shares.
- Mining fund volatility (GDX specifically). Gold mining ETFs carry additional company and operational risk on top of gold price risk, making them considerably more volatile than physically-backed funds.
- Leveraged/inverse fund risk. As with other asset classes, leveraged and inverse gold funds are structurally unsuited to long-term holding and carry substantially higher risk than a standard physically-backed fund.
How to Choose a Gold ETF
Want the lowest possible ongoing cost for long-term holding: GLDM or IAUM currently lead on expense ratio among major physically-backed funds.
Want maximum liquidity and the deepest options market: GLD remains the standard choice, despite its higher fee.
Want a balance of cost and liquidity: IAU sits between the two extremes.
Want geographic custody diversification outside London: SGOL is the primary mainstream option, vaulting in Switzerland.
Want equity-style leverage to gold prices (and are comfortable with added company risk): GDX offers exposure to mining companies rather than physical gold — a meaningfully different risk profile, not a simple substitute.
Frequently Asked Questions
Is a gold ETF the same as owning physical gold? Not exactly. Physically-backed gold ETFs do hold real gold bullion in vaults, and each share represents a fractional claim on that gold, but you don’t personally hold or control the physical metal — you own shares of a fund and are relying on the custodian to securely store and accurately account for it.
Why is GLD so much bigger than cheaper alternatives like GLDM if it charges a higher fee? Largely institutional inertia and liquidity needs — large funds, banks, and pension plans that require GLD’s superior trading volume and deep options market continue to use it despite the higher fee, while individual long-term investors increasingly favor lower-cost alternatives like GLDM or IAU for the same underlying gold exposure.
How much of my portfolio should be in gold? There’s no universal answer — this depends on your goals, risk tolerance, and view on diversification. Gold is generally discussed in mainstream financial guidance as a smaller diversifying allocation rather than a core portfolio holding, given that it generates no income and carries its own price volatility. This is general information, not a personalized recommendation.
Are gold ETFs a good inflation hedge? Gold has historically been discussed as a potential inflation hedge, though the relationship isn’t perfectly consistent across every inflationary period in history. Its performance during any specific period depends on many factors beyond inflation alone, including interest rates, currency movements, and investor sentiment.
What’s the difference between GLD, IAU, and GLDM if they all hold physical gold? Primarily expense ratio, share price, liquidity, and options market depth — the underlying gold exposure is very similar across all three, so for many long-term holders, cost is the most meaningful differentiator.
Can I hold a gold ETF in a Roth IRA? Generally yes, provided your brokerage supports it, though the collectibles tax treatment described above works differently inside a tax-advantaged account, since Roth IRA growth isn’t taxed annually or, if qualified, upon withdrawal in the same way a taxable account would be. A tax professional can clarify how this applies to your specific account and situation.
Is a gold mining ETF like GDX a substitute for a physically-backed gold ETF? No — they’re different investments with different risk profiles. GDX exposes you to mining company stock risk in addition to gold price movement, and has historically been more volatile than physically-backed gold funds like GLD or IAU.
This article reflects publicly available fund data as of the “last updated” date above and is provided for informational purposes only — it is not a recommendation to buy or sell any security or commodity. Expense ratios, AUM, custody arrangements, and tax treatment referenced above change over time; always verify current data directly on each issuer’s official fund page and confirm tax treatment with a licensed tax professional before making an investment decision. Read our full Disclaimer and Privacy Policy for more information.