GLD vs IAU vs GLDM: Which Gold ETF Should You Hold?

All three of the largest gold ETFs hold the same thing — allocated gold bars in a vault — and all three track the same benchmark. So the choice comes down to cost, share size, and what you intend to do with the position.

The differences look small quoted as percentages. Compounded over a decade of holding, they are not.

Two things about those share sizes. First, they are approximate and they drift downward over time — every fund pays its fee by selling a small amount of gold, so the metal backing each share slowly declines. Second, the ratio between them is what matters, and it is roughly 4.9 IAU shares, or 4.6 GLDM shares, to one GLD share.

You can see the live figures on the Gold ETF Calculator, which derives each ratio from current prices rather than assuming a fixed ounces-per-share number.

GLD charges 0.40% a year. GLDM charges 0.18%. On a $100,000 position, that difference is $220 in the first year.

The part people underestimate is that the fee is charged against the whole position every year, so it compounds. Over ten years, the gap between 0.40% and 0.18% costs roughly 2.3% of your position— not 2.2% of the first year’s value. It is taken out of the gold itself, so you also lose the return on the gold that was sold to pay it.

For a buy-and-hold position, that is the entire decision. GLDM and IAU hold the same metal in the same kind of vault, and charge roughly half what GLD does. There is no additional risk taken to earn that saving.

It is not nothing. Three things justify it for some holders.

Liquidity. GLD trades far more volume than the other two. On a large order, or one placed in a hurry, that shows up as a tighter spread and less market impact.

An options market. This is the big one, and it is frequently underweighted. GLD has a deep, penny-wide options chain with weekly expiries. IAU has options but a fraction of the open interest; GLDM effectively has none worth trading. If you sell covered calls or cash-secured puts against your gold position, GLD is not a slightly worse choice — it is the only practical one.

Familiarity and size.GLD launched in 2004 and is by far the largest, at roughly $145bn against IAU’s ~$64bn and GLDM’s ~$31bn. For an institution with counterparty and reporting requirements, size is a feature.

The honest answer depends on one question: will you ever trade options on it?

• If yes, use GLD. The extra 0.22% is the price of admission to a functional options market, and one well-placed covered call covers the fee difference on a decent position.
• If no — if this is a long-term holding you rebalance occasionally — use GLDM. It is the cheapest of the three for the same exposure.
• IAU sits between them: cheaper than GLD, more liquid than GLDM, with options that exist but are thin. It is a reasonable middle if you are unsure.

Suppose you already hold GLD and have just read the fee comparison above. Switching to GLDM saves 0.22% a year. Should you?

Probably not, and the reason has nothing to do with the funds. Selling GLD to buy GLDM realises your gain. If you have held the position for years through a gold bull market, that gain is taxable now — and it would otherwise have stayed unrealised indefinitely, because you never had to sell.

Worse, gold ETFs are taxed as collectibles in the US, which means a top rate of 28% rather than the 20% long-term capital gains rate. On a position with a $50,000 embedded gain, switching realises a tax bill around $14,000. At 0.22% a year, it would take about a century for the fee saving to cover that.

The saving only pays if you are starting a position, or if the position is at a loss or sitting in a tax-advantaged account where gains are not taxed on the way out. Otherwise, the fee comparison is a reason to pick the right fund next time, not a reason to churn the one you already own.

The competition is worth understanding, because it explains where the fees are heading.

GLD launched in 2004 and had the market to itself for over a year. It priced at 0.40% because it could. IAU arrived in 2005 and undercut it at 0.25%, and grew steadily on that basis alone.

GLDM is the interesting one. It came in 2018 from the same issuer as GLD — State Street launched a cheaper product to compete with the fund it already ran. That is not a mistake; it was a defensive move. The fee floor in this category kept falling, and rather than cut GLD’s fee (which would have cost it hundreds of millions in annual revenue on a $145bn fund), State Street created a new fund at the new price point.

The practical lesson: fees in this category have only ever moved one direction. A fund that looks cheap today may not be in five years, and the answer is usually to buy the new one going forward rather than switch out of the old one — for the tax reason above.

All three are treated the same for US tax purposes. Physical gold held through an ETF is a collectible, which means gains are taxed at the collectibles rate rather than the long-term capital gains rate. That applies identically to GLD, IAU and GLDM, so it should not influence the choice between them — but it is worth knowing before you buy any of them, and it is the reason switching funds is expensive rather than free.

If you are switching, the conversion arithmetic is simple and the Gold ETF Calculator handles it: enter the share count you hold in one row and read the equivalent off the others. Just remember that the ratio between the funds drifts slowly, so a conversion that was exact a year ago will be off by a small amount today.