GLD vs IAU: Two Ways to Own Gold
GLD and IAU are the two largest physical gold ETFs, and they do essentially the same thing: hold gold bullion in a vault and let you own shares that represent a fraction of that gold. The investment thesis is identical — you are betting on the price of gold going up. The differences are all in the packaging.
And in this case, the packaging matters more than you might think, because it directly affects how much you pay and how much gold your shares represent over time.
How Physical Gold ETFs Work
Both GLD and IAU are trusts that purchase and store physical gold bars in secure vaults. When you buy shares, you are buying fractional ownership of the trust's gold. The share price of each fund tracks the spot price of gold, minus the fund's ongoing expenses.
Neither fund uses gold futures, derivatives, or any form of leverage. This is straightforward, physical-gold-backed ownership in ETF form. Both funds publish daily bar lists that let you verify the gold held in their vaults.
Expense Ratio: IAU Is Significantly Cheaper
IAU charges 0.25%. GLD charges 0.40%. That is a 60% cost premium for GLD over IAU, which is significant when both funds hold the exact same commodity.
On a $50,000 gold allocation, you pay $125 per year with IAU vs $200 with GLD. Over 10 years, the compounding fee difference on this amount is roughly $800-1,000 — money that essentially evaporates into fund expenses.
Here is the thing about gold: unlike stocks, gold does not generate earnings, dividends, or cash flow. The only return comes from price appreciation. Every dollar lost to fees is a dollar of pure drag with no offsetting productive value. This makes expense ratios even more important for gold ETFs than for equity ETFs.
Share Price and Accessibility
GLD was designed so that each share represents roughly 1/10 of an ounce of gold. At gold prices around $2,000 per ounce, one share of GLD costs approximately $200.
IAU was designed so that each share represents roughly 1/100 of an ounce of gold, making its share price about 1/10 of GLD's — roughly $20 per share. This lower price point historically made IAU more accessible for small investors and easier to use for precise dollar-amount allocations.
With fractional share trading now widely available at major brokers, the share price difference matters less than it used to. But if your broker does not support fractional shares, IAU's lower price lets you make smaller, more precise investments.
Liquidity and Trading Volume
GLD is one of the most traded ETFs in the world. Its average daily volume typically ranges from 5-15 million shares, with extremely tight bid-ask spreads. During market stress or major gold price moves, GLD's liquidity can surge even higher.
IAU has lower but still substantial trading volume — typically 3-8 million shares per day. Its bid-ask spreads are slightly wider than GLD's but still very tight. For any retail investor buying or selling in normal quantities, IAU's liquidity is perfectly adequate.
Where GLD truly shines is in its options market. GLD options are heavily traded with deep liquidity, tight spreads, and a wide range of strike prices and expirations. If you want to trade gold options — covered calls, protective puts, or other strategies — GLD is the standard instrument.
Gold Held and Storage
GLD stores its gold primarily in HSBC's vault in London. IAU stores gold in vaults operated by JPMorgan in London, Toronto, and New York. Both custodians are major global banks with extensive security infrastructure.
Both funds undergo regular audits to verify that the physical gold matches the shares outstanding. There is no meaningful difference in the safety or verification process. Concerns about whether the gold "really exists" apply equally to both funds and have been addressed repeatedly through independent audits.
Performance Comparison
Because both funds hold physical gold, their gross returns are determined entirely by the spot price of gold. The only performance difference comes from the expense ratio. IAU consistently outperforms GLD by approximately 15 basis points per year — almost exactly the fee differential.
Over a 10-year holding period, this fee-driven outperformance compounds to a meaningful gap. If gold returns 5% annualized, the difference in terminal value between GLD and IAU on a $100,000 investment would be approximately $1,800 over 10 years. That is not life-changing money, but it is free money that you keep by choosing the cheaper fund.
Check the latest numbers at GLD vs IAU comparison.
What About GLDM?
It would be incomplete to discuss GLD vs IAU without mentioning GLDM (SPDR Gold MiniShares). GLDM charges just 0.10%, making it cheaper than both GLD and IAU by a wide margin. It was launched in 2018 by the same sponsor as GLD (State Street) specifically for cost-conscious, long-term investors.
GLDM has lower trading volume and a much smaller options market than either GLD or IAU. But for buy-and-hold gold exposure, GLDM offers the lowest cost of any major physical gold ETF. If you are comparing GLD vs IAU purely on cost, GLDM deserves a spot in the conversation.
Tax Treatment
Both GLD and IAU are taxed the same way. The IRS treats gold ETFs as collectibles, meaning long-term capital gains are taxed at a maximum rate of 28% — higher than the 15-20% rate applied to stocks held over one year.
This higher tax rate makes the account where you hold gold ETFs especially important. In a traditional IRA, taxes are deferred entirely. In a Roth IRA, gains are tax-free. Holding gold ETFs in a taxable account means paying the collectibles rate on any profits. Learn more about how to invest in gold ETFs effectively.
Why Would Anyone Choose GLD Over IAU?
Given IAU's lower expense ratio, why does GLD still manage hundreds of billions in assets? Three reasons:
Institutional inertia. GLD launched in 2004 as the first major gold ETF and became the default gold vehicle for institutions. Many pension funds, endowments, and hedge funds have GLD written into their investment mandates. Switching is bureaucratically difficult.
Options trading. GLD's options market is deeper and more liquid than IAU's. For sophisticated options strategies on gold, GLD is the standard instrument. The higher expense ratio is irrelevant for short-term options positions.
Brand recognition. GLD is the gold ETF that most people know by name. Many investors simply buy what they recognize without comparing alternatives. This is not a good reason, but it is a real one.
The Verdict
IAU is the better choice for most investors who want buy-and-hold gold exposure. Its 0.25% expense ratio saves meaningful money compared to GLD's 0.40%, and its liquidity is more than sufficient for retail investors. The share price is also more convenient for smaller accounts.
If your primary goal is minimizing costs, GLDM at 0.10% is worth serious consideration as an even cheaper alternative.
Choose GLD only if you need its superior options liquidity or if institutional mandates require it. For everyone else, paying more for the same gold makes no financial sense. For more on building a gold allocation, see hedging your portfolio with ETFs or explore the ETF directory.
