One of the easiest and lowest-cost ways to buy gold is through a gold exchange traded fund (ETF). But which Gold ETF should you buy? When the first physical gold-backed ETF debuted in 2004, the best Gold ETF for trading and investing was the SPDR Gold Shares ETF (GLD) because it was the only game in town.
Today, U.S. investors have seven physical gold ETFs to choose from. The SPDR Gold Shares ETF was the first, and it is still the biggest, but it’s no longer the best for every scenario. We’ll breakdown the U.S. Gold ETF and help you choose the best ETF for long-term investment and the best for trading.
The table below lists the seven Gold ETFs that invest exclusively in physical gold, including their expense ratios, assets under management, transaction costs as measured by the average bid-ask spread, and dollar volume.
Table of Gold ETFs Listed in the United States
|Assets ($ mil)
|Avg. bid-ask spread
|Dollar Volume ($ mil)
|SPDR Gold Shares
|Aberdeen Standard Physical
|SPDR Gold MiniShares
|VanEck Merk Gold
|Perth Mint Physical Gold
Gold ETFs are a Commodity
Unlike some equity ETFs that may cover value stocks or growth stocks by tracking an index that measures growth and value differently, the gold ETFs in the table above all purchase physical gold. The assets held by each fund are essentially identical.
What Makes One Gold ETF Better than Another?
Obviously then, the assets that a physical gold ETF purchases are not a key differentiator. There are differences though. The primary differences between the Gold ETFs listed above are at the expense, liquidity, and administration level.
Expenses and Liquidity are Key for Gold ETFs
The administration of most of the Gold ETFs is similar. There are small differences, but all are structured as trusts, and all have sponsors, administrators, and custodians. All keep shareholders’ gold safe in bank vaults. An investor’s gold is likely just as safe in the SPDR GoldShares ETF (GLD) as it is in the Aberdeen Standard Physical Gold ETF (SGOL).
Expenses and liquidity are the primary factors to focus on when choosing a gold ETF for investment or trading.
All else equal, you should favor a large, heavily traded gold ETF with a low expense ratio over a small infrequently traded fund with a high expense ratio.
If you are a trader of Gold ETFs, liquidity and bid-ask spreads are the most important factors to consider.
If you are a longer-term investor in Gold ETFs, liquidity and transaction costs are important, but the expense ratio matters a lot too.
What is the Best Gold ETF for Traders?
The largest and most liquid gold ETF is the SPDR Gold Shares ETF (GLD). SPDR GoldShares has the greatest dollar volume of the seven ETFs listed in the table above. GLD’s average dollar volume is about five times as large as its closest competitor.
The SPDR Gold Shares ETF also has the lowest bid-ask spread of the physical gold ETFs traded in the U.S. The average bid-ask spread of GLD is .01%, or one basis point. The next closest competitor is seven times as expensive as GLD. Yes, we are only talking seven basis points, but if he completes 5 round trip trades, GLD’s lower bid-ask spread will save a trader 60 basis points.
For traders, the best gold ETF is, without a doubt, the SPDR Gold Shares ETF (GLD).
What is the Best Gold ETF For Investors?
While SPDR Gold Shares was once the best gold ETF for traders as well as investors, cheaper alternatives have emerged.
With a 0.40% expense ratio, SPDR Gold Shares ETF ties for the highest expense ratio among the gold ETFs listed in the U.S. That’s more than double some of the low-cost gold ETFs that can be purchased today.
GLD does have the advantage in terms of liquidity and bid-ask spread, but for investors purchasing a gold ETF with a multi-year time horizon, the lower expense ratio of an ETF such as GLDM covers the higher transaction costs well within the first year of ownership.
For example, if an investor plans to buy and hold a gold ETF for three years and is deciding between the SPDR Gold Shares ETF (GLD) and the SPDR Gold MiniShares ETF (GLDM), his average costs over the three year holding period will be 40.3 basis points for GLD and 20.3 basis points with GLDM. A savings of 20 basis points per year for almost the exact same investment.
Expense ratio isn’t the only factor long-term investors should consider when investing in Gold ETFs, though. Liquidity and transaction costs are also variables of importance.
The GraniteShares Gold Trust (BAR) is the gold ETF with the lowest expense ratio, but it also has the highest transaction costs (bid-ask spread), and its dollar volume is an unimpressive $1.2 million. Saving an additional basis point on the expense ratio relative to SPDR Gold MiniShares ETF (GLDM) doesn’t make up for the smaller size and higher transaction costs.
SPDR Gold MiniShares ETF is Best for Investors
Our favorite gold ETF for investors is the SPDR Gold MiniShares ETF (GLDM). GLDM has one of the lowest expense ratios among the gold ETFs traded in the U.S., it has heft with $1.1 billion in assets, and the bid-ask spread is competitive.
Coming in a close second would be the Aberdeen Standard Physical Gold Trust (SGOL). SGOL is cheaper by one basis point, it also has critical mass in terms of size, and SGOL has the same bid-ask spread as GLDM.
The reason we favor GLDM is that we believe the liquidity and transaction costs on GLDM will come down over time as the ETF gathers assets.
SPDR Gold MiniShares (GLDM) launched in the summer of 2018, and it has gathered over $1 billion in assets during that time. The Aberdeen Standard Physical Gold Trust’s (SGOL) assets under management increased by about $200 million since the summer of 2018.
Should you Sell your Existing Gold ETFs to Buy GLDM?
If you own SPDR Gold Shares (GLD), VanEck Merck Gold Trust (OUNZ), or iShares Gold Trust (IAU) in a tax-deferred account, and you plan to hold your position for at least two years, it probably makes sense (high commission or low investment amounts can impact this) to swap into the SPDR Gold MiniShares ETF (GLDM). The same arithmetic holds true if you own one of these higher expense ratio ETFs in a taxable account at a loss.
However, if you hold GLD in a taxable account at a gain, the capital gains taxes due upon sale of GLD could alter the calculus of shifting to a lower-cost gold ETF like GLDM.