Quick Answer
- GLD (0.40%), IAU (0.25%), and GLDM (0.10%) all hold the same London Good Delivery gold bars. For buy-and-hold, GLDM is the obvious pick. GLD's fee only buys liquidity that active options traders use.
- Physical gold ETFs track the spot price of gold closely. They hold allocated bullion in a vault, so they carry none of the futures-roll drag that hurts commodity funds like oil's USO.
- Gold miners (GDX, GDXJ) are equity funds, not metal. They have historically moved two to three times as hard as gold in both directions, and they pay a small dividend where bullion pays none.
- SLV holds silver, which is half precious metal and half industrial input for solar panels and electronics. It swings harder than gold and tracks the economic cycle in a way gold does not.
- Physical gold and silver ETFs are taxed as collectibles: a maximum 28% long-term rate in a taxable account, higher than the 15% or 20% on stocks. Miners are taxed as normal equities.
GLD, IAU, and GLDM Hold the Exact Same Gold
All three of the largest gold ETFs hold the same thing: allocated London Good Delivery gold bars, sitting in vaults, audited and assigned to the fund. There is no index to track, no basket of stocks, no strategy. One share is a claim on a fixed weight of gold, minus the fee. So the honest question is not which fund holds better gold. It is why you would pay more for identical metal.
GLD (SPDR Gold Shares) is the original, launched in 2004, and it still carries the deepest liquidity and the largest options market in the space at a 0.40% expense ratio and roughly $72 billion in assets. IAU (iShares Gold Trust) holds the same bars for 0.25%. GLDM (SPDR Gold MiniShares) holds them for 0.10%, and State Street built it specifically for buy-and-hold investors who do not need GLD's trading machinery. SGOL (0.17%) and BAR (0.175%) round out the low-cost physical options.
On a $50,000 position held for a decade, GLD's 0.40% costs about $200 a year versus GLDM's $50. Same gold, roughly $1,500 more paid over ten years for liquidity you only use if you trade options. A long-term holder in GLD is quietly subsidizing the traders who need it.
Our position is straightforward: if you are buying gold to hold it, use GLDM over GLD, or IAU if your broker makes it cheaper to trade. GLD earns its fee only for someone running an options strategy or moving size in and out daily. The three funds compared side by side make the gap plain: the metal is identical, the cost is not.
Bullion and Gold Miners Are Two Different Bets
The bigger fork is between owning the metal and owning the companies that dig it up. GDX (VanEck Gold Miners) holds about 50 mining companies at 0.51%. GDXJ (VanEck Junior Gold Miners) holds roughly 90 smaller, earlier-stage miners at 0.52%. Neither one holds an ounce of gold. They hold equity in businesses whose profits depend on the price of gold.
That distinction is the whole story with miners. A gold miner earns the spread between the price of gold and its cost to pull it out of the ground. When gold rises 10%, a miner's profit margin can widen far more than 10%, because its costs are roughly fixed. Historically that has turned a 10% move in gold into a 20% to 30% move in the miners, in both directions. GDX is a leveraged-feeling bet on gold without using leverage, and it comes with company risks bullion never has: management missteps, mine accidents, and the politics of whatever country the ore sits under.
Investors reach for GDX expecting "gold with a dividend" and get something closer to a high-beta equity sector fund. Over some multi-year stretches the miners have badly lagged the metal itself, even while gold rose, because rising production costs ate the margin. If you want exposure to the price of gold, buy gold. Buy miners only if you specifically want the operating leverage.
Silver Is Half Precious Metal, Half Industrial Bet
SLV (iShares Silver Trust) holds physical silver the same way GLD holds gold, at a 0.50% expense ratio. SIVR (abrdn Physical Silver) covers the same ground more cheaply at 0.30% for cost-conscious holders. But the mistake worth avoiding is treating silver as discount gold. It is a different asset.
Roughly half of silver demand is industrial: solar panels, electronics, and electrical contacts consume it, so silver trades partly on the economic cycle rather than purely on fear and monetary policy the way gold does. That dual identity makes silver more volatile than gold in both directions. It tends to fall harder in recessions when industrial demand drops, and it can rise faster in a metals rally. If you are adding a precious metal for its defensive, low-correlation behavior, gold has historically played that role more reliably than silver. The gold versus silver comparison shows how differently the two have moved.
Physical Gold ETFs Are Taxed as Collectibles, Not Stocks
This is the part that catches people at tax time. A physical gold or silver ETF is a grantor trust that holds bullion, and the IRS treats bullion as a collectible, the same category as art or coins. In a taxable account, that changes the tax rate on your gain.
Sell a stock or a normal equity ETF you have held more than a year and the long-term capital gains rate is 0%, 15%, or 20% depending on income. Sell GLD, IAU, GLDM, or SLV held more than a year and the long-term gain is taxed at the collectibles rate: your ordinary rate, capped at a maximum of 28%. For a higher-income investor that is a real difference, up to 8 percentage points of extra tax on the same size gain, purely because of how the fund is legally structured.
None of this makes gold ETFs a bad idea. It just means the account you hold them in matters more than it does for a stock fund, and the after-tax return on a long-held bullion position is lower than the headline gain suggests. Our ETF tax guide covers how fund structure drives tax treatment across categories. This is general education, not personalized tax advice.
The Full Lineup, Compared
| Fund | Expense Ratio | Holds | Yield | Notes |
|---|---|---|---|---|
| GLDM | 0.10% | Physical gold | 0% | Cheapest mainstream gold ETF. Built for buy-and-hold. |
| SGOL | 0.17% | Physical gold | 0% | Low-cost physical option from abrdn. |
| BAR | 0.175% | Physical gold | 0% | Small but cheap GraniteShares fund. |
| IAU | 0.25% | Physical gold | 0% | Same bars as GLD, cheaper. Deep liquidity. |
| GLD | 0.40% | Physical gold | 0% | The original. Deepest options market. Overkill for holders. |
| SLV | 0.50% | Physical silver | 0% | More volatile than gold. Half industrial demand. |
| GDX | 0.51% | ~50 gold miners | 1.5% | Equity, not metal. Amplifies gold moves 2-3x. |
| GDXJ | 0.52% | ~90 junior miners | 1.0% | Smaller miners. Higher risk than GDX. |
Expense ratios, yields, and holdings counts approximate and change over time. Past performance does not guarantee future results.
What Gold Actually Does in a Portfolio
Gold pays no interest, no dividend, and produces nothing. A share of GLD held for ten years is worth exactly the gold behind it, minus a decade of fees, and that backing shrinks slightly every year as the expense ratio is drawn from the metal. The entire case for holding it rests on one property: gold has historically moved differently from stocks and bonds, and it has held value during stretches of high inflation and market stress when little else did.
That makes gold a diversifier, not a growth engine. Reasonable investors disagree on how much belongs in a portfolio, and plenty hold none at all. Where people get into trouble is sizing. A 5% position behaves like a hedge. A 25% position is a large bet that a specific macro environment plays out, and it drags on long-run returns if it does not, because the money is not compounding the way stocks do. We think a single-digit percentage is a sensible ceiling for most long-term investors who want the diversification without letting it dominate. The how to choose an ETF guide covers sizing any single position, and thematic and satellite holdings follow the same discipline.
Common questions
GLDM (SPDR Gold MiniShares) is the cheapest mainstream gold ETF at a 0.10% expense ratio. IAU charges 0.25%, and GLD charges 0.40%. All three hold the same London Good Delivery gold bars in the same vaults, so for a buy-and-hold investor the cheaper fund is the straightforward choice. GLD's higher fee buys deeper liquidity and a large options market, which matters to active traders but not to someone simply holding gold. SGOL (0.17%) and BAR (0.175%) are two more low-cost physical options. Expense ratios change over time, so verify the current figure before buying.
Physical gold and silver ETFs such as GLD, IAU, GLDM, and SLV are grantor trusts that hold bullion, and the IRS treats bullion as a collectible. In a taxable account, long-term gains are taxed at the collectibles rate, a maximum of 28%, rather than the 15% or 20% long-term rate that applies to stocks and most equity ETFs. Short-term gains are ordinary income either way. Gold-miner ETFs like GDX and GDXJ are ordinary equity funds and are taxed at the normal 15% or 20% long-term rate. Holding a physical-metal ETF inside an IRA or Roth IRA avoids the collectibles treatment. This is general education, not personalized tax advice.
GLD holds physical gold bullion and tracks the spot price of gold closely, at a 0.40% expense ratio. GDX holds shares of about 50 gold-mining companies at 0.51% and is an equity fund, not a metal fund. Miners earn the spread between the price of gold and their cost of production, so their profits rise and fall faster than the metal itself. Historically a 10% move in gold has become a 20% to 30% move in the miners, in both directions. GDX also carries company-specific risks that bullion does not, including management decisions, mine accidents, and country risk, and it pays a small dividend where bullion pays none.
Physical gold and silver ETFs pay no dividend. Bullion generates no income; it just sits in a vault, so the only return is price change, and the fund's expense ratio is deducted from the metal it holds, meaning your share is backed by very slightly less gold each year. Gold-miner ETFs are the exception: GDX yields roughly 1.5% and GDXJ around 1.0%, because the underlying mining companies earn profits and pay dividends. If income matters to you, bullion funds are the wrong tool.
One ETF concept a week. Free, forever.
Plain-English ETF breakdowns like this one, straight to your inbox. No jargon, no stock tips.
Reviewed by a CFA® charterholder · No spam · Unsubscribe anytime