Gold ETF Guide: GLD vs IAU vs GLDM, Fees and Taxes

Spot gold is at $4,194.40 per ounce right now. A gold ETF gives you a claim on that ounce price through an ordinary brokerage account. You skip the vault, the insurance policy and the dealer markup. In exchange you pay a yearly fee and own a share in a trust rather than metal in your hand.

The main choice is not "which gold ETF is best." It is which of three different products you actually want. Physically backed funds track the metal. Miner funds own companies. Leveraged funds are daily trading tools. Each one behaves differently and is taxed differently.

How a physically backed gold ETF works

The big US gold funds are set up as grantor trusts. The mechanics are simple:

1. The trust buys gold bars. These are London Good Delivery bars, about 400 troy ounces each, held by a custodian bank. Most are in London vaults; some funds also use Zurich.
2. Each share represents a fixed slice of that gold. The fund publishes the exact troy ounces per share every day.
3. Large brokers keep the price honest. Authorized participants create new shares by delivering gold to the trust, or redeem shares for gold. If the share price drifts above or below the value of the gold behind it, they profit by closing the gap. That pulls the price back in line.
4. The fee is paid in gold. The trust sells a little metal over time to cover expenses. Your ounces per share shrink slightly every year. That is the real cost of ownership.

To value a share, multiply ounces per share by spot. If a fund holds 0.09 oz per share, each share is worth about 0.09 × $4,194.40, before any small premium or discount on the exchange.

The fund does not pay interest or dividends. Gold doesn't produce cash flow, so neither does a trust that only holds gold.

Major gold ETFs compared

Expense ratios below come from recent sponsor disclosures and do change. Check the fund's own site before buying.

The first seven funds do the same job. They hold gold, track gold and are taxed alike. What separates them is cost, share price and trading volume.

GLD is the largest and most heavily traded gold ETF in the world. That matters for institutions moving huge blocks or trading options. It is also the most expensive of the group.

GLDM, IAUM, SGOL, BAR and AAAU are the cheap versions. For a buy-and-hold investor, the lower fee usually matters more than GLD's extra liquidity.

What the fee actually costs you

Expense ratios look tiny. Over many years they add up.

Compare that with physical gold. Popular coins and small bars often carry dealer premiums of several percent over spot when you buy. You get most of that back only in good resale conditions, though recognized bullion often sells back near spot (97–100%+ of spot). Physical has no annual fee unless you pay for storage or insurance. The ETF has an annual fee but almost no cost to get in or out, apart from a penny-wide bid/ask spread.

The pattern is simple. The ETF costs more the longer you hold it. Physical costs more upfront and if you trade often.

The tax catch: gold ETFs are collectibles

This is the detail most "best gold ETF" lists skip. It is often the biggest cost.

The IRS treats a grantor-trust gold ETF as though you own the gold directly. Gold bullion is a collectible, so:

• Held more than one year: long-term gains are taxed at your ordinary income rate, capped at 28% federally. Stock ETFs top out at 20%.
• Held one year or less: short-term gains are taxed as ordinary income, the same as stocks.
• Net investment income tax: higher earners may owe the extra 3.8% on top.
• The small gold sales the trust makes to pay its fee are technically taxable events for shareholders. The amounts are tiny, but the fund's annual tax information covers them.

Here is a quick example. A $20,000 long-term gain in a stock ETF, for someone in the 15% long-term bracket, costs $3,000 in federal tax. If that person's ordinary rate is 24%, the same gain in GLDM is taxed at 24%, or $4,800. Someone in the 32% bracket or higher pays the 28% cap.

Three workarounds:

• Hold the ETF in an IRA or 401(k) brokerage window. Gains inside the account aren't taxed each year, and collectibles treatment doesn't apply inside the account. Regular IRA rules apply on withdrawal. It's often simpler and cheaper than a dedicated gold IRA holding coins.
• Miner ETFs like GDX are ordinary stock funds, so they get normal capital gains rates. You're buying different risk, though (see below).
• Futures-based funds get blended 60/40 long/short-term treatment, but they come with K-1 forms, roll costs and, for leveraged funds, daily-reset decay.

This is general information, not tax advice. A tax pro can run your specific bracket.

Gold ETF vs gold miners ETF

GDX and GDXJ are often grouped with gold ETFs. They are a different animal.

• Leverage to gold. A miner's costs are largely fixed, so profits swing more than the gold price. In gold rallies, miners have often risen faster than the metal. In selloffs they've often fallen harder.
• Company risk. Strikes, cost overruns, bad acquisitions, political risk in mining countries and plain stock-market selloffs can hit miners even when gold is flat.
• Dividends. Many large miners pay them; bullion pays nothing.
• Taxes. Regular stock rates rather than the collectibles rate.

GLDM is a bet on the gold price. GDX is a bet on gold businesses. Our gold stocks guide goes deeper on the trade-offs.

Gold ETF vs physical gold

People who want gold they can hold, outside the financial system, buy metal. See our guides to gold bullion and live coin and bar values. People who want a clean, cheap, liquid price tracker in the same account as their index funds tend to use ETFs. Many investors hold both for different reasons.

How to choose between gold ETFs

If you've decided a physically backed fund fits, the comparison is mostly mechanical:

1. Expense ratio first. For long-term holders, it's the main ongoing difference between near-identical funds.
2. Trading volume and spread. GLD and IAU are the most liquid. The cheaper funds are still liquid enough for ordinary investors; use limit orders.
3. Share price. Smaller-share funds (GLDM, IAUM) suit small, regular purchases, though fractional shares make this less important.
4. Vault details. All the major trusts publish bar lists and custodian information. Some investors prefer allocated bars or non-US vault locations, such as SGOL's Zurich holdings.
5. Account type. Decide where it goes. Given the 28% collectibles rate, location can matter more than a few basis points of fee.
6. Avoid leveraged funds for holding. Products like UGL reset daily. Over weeks of choppy prices they can lag 2× the gold return badly.

Before you buy: context worth knowing

Gold ETFs track gold exactly, including its swings. Gold has had long flat stretches and sharp drops alongside its big runs. Our gold price history page shows them. The price is currently off its 52-week high. What moves it day to day is mostly real interest rates, the dollar and central-bank buying. Why is gold moving today? tracks those drivers.

None of this is a recommendation to buy or avoid gold. It explains what you'd be getting. For the physical route, start with how to buy gold. For today's numbers, see the live gold price.

The bottom line

A physically backed gold ETF holds vaulted bars and tracks spot gold, currently $4,194.40 an ounce, minus a yearly fee. Funds like GLD, IAU, GLDM, IAUM, SGOL, BAR and AAAU are close substitutes. Cost and liquidity are the main differences, and the low-fee funds suit most buy-and-hold investors. Two things matter more than which ticker you pick. First, gains in a taxable account are taxed as collectibles at up to 28%. Second, miner ETFs and leveraged funds are separate products with very different risks.