GLD vs IAU: Best Gold ETF?
Two ETFs backed by vaulted gold bullion. GLD is the liquidity king for traders; IAU is the cheaper, lower-priced version for long-term holders. The metal inside is the same.
Don't have time? Here's what you need to know:
- 1GLD and IAU both hold physical gold bullion; each share is a claim on vaulted metal, tracking the spot price.
- 2IAU is cheaper (~0.25% vs GLD's 0.40%) and lower-priced per share — better for long-term holders.
- 3GLD's edge is the deepest liquidity and options market, which matters mainly to active traders.
- 4Gold pays no income and can lag for years, so keep any position small, often 5-10% of a portfolio.
Both Are Backed by Real, Vaulted Gold
GLD (SPDR Gold Shares) and IAU (iShares Gold Trust) do the same fundamental thing: each holds physical gold bullion in secure vaults, and each share represents a fractional claim on that metal. When you buy either, your return tracks the spot price of gold, minus the fund's expenses — no mining stocks, no futures, just allocated bullion.
Because both are backed by the same commodity, their price movements are nearly identical day to day. Gold itself pays no dividend or interest; it is a non-yielding store of value that investors hold as an inflation and crisis hedge and a diversifier against stocks and bonds. The choice between GLD and IAU is therefore about cost, share price and liquidity, not about what you own.
Where GLD Still Wins: Liquidity
GLD is the largest and most liquid gold ETF in the world. It trades immense daily volume, posts the tightest bid-ask spreads in the category, and anchors the deepest gold-ETF options market. For active traders, institutions executing large orders, and anyone using options to hedge or speculate on gold, GLD's depth is a genuine advantage that IAU, while liquid, doesn't fully match.
For an ordinary investor buying a few hundred or few thousand dollars of gold and holding it, that liquidity edge is invisible — IAU's spreads are perfectly tight at retail size. Paying GLD's higher expense ratio every year to access trading depth you'll never use is the same bad trade as choosing SPY over a cheaper S&P 500 fund purely for liquidity you don't need.
Important: Gold is a non-yielding hedge, not a growth engine. It can go years with flat or negative real returns, so size any gold position as a small diversifier, commonly 5-10% of a portfolio.
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Which Gold ETF to Choose
If your goal is to hold gold as a long-term diversifier or inflation hedge, IAU is the smarter default: same bullion backing, a lower 0.25% fee, and a low share price that's easy to buy in small amounts. Over years of holding, the cost savings on a non-yielding asset add up.
If you're an active trader or options user, or you're moving very large sums, GLD's unmatched liquidity justifies its higher fee for your use case. And if you already hold GLD in a taxable account with gains, note that physical-gold ETFs are typically taxed as collectibles at a higher long-term capital-gains rate — another reason not to sell and rebuy casually. Redirect new gold purchases to IAU rather than triggering a tax bill to switch.
Frequently Asked Questions
Is GLD or IAU better?
For long-term holders, IAU is usually better: it holds the same physical gold as GLD but charges around 0.25% versus GLD's 0.40%, and trades at a lower share price that's easier to buy in small amounts. GLD is better for active traders and institutions because it has the deepest liquidity and options market in the gold-ETF category.
Do GLD and IAU hold the same thing?
Effectively, yes. Both are backed by physical gold bullion stored in secure vaults, and each share represents a claim on that metal. Their prices track the spot price of gold almost identically. The differences are the expense ratio, share price and liquidity, not the underlying asset.
How are gold ETFs like GLD and IAU taxed?
Physical-gold ETFs structured as trusts are generally taxed as collectibles in the U.S., which means long-term gains can be taxed at a maximum rate higher than the rate on stocks. This makes them somewhat less tax-efficient than equity ETFs and is a reason to be deliberate about where you hold them and to avoid unnecessary selling.
How much gold should I hold in my portfolio?
Gold is a non-yielding diversifier and inflation hedge, not a growth asset, and it can go long stretches with flat or negative real returns. Investors who include it commonly keep it to a small slice, often around 5-10% of the portfolio, so it cushions stock-and-bond volatility without dragging long-term returns too much.
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Alex Harrington
CFA Level II Candidate, Finance & Economics
Alex Harrington is an independent ETF researcher and personal finance writer with over 8 years of experience analyzing exchange-traded funds. A CFA Level II candidate with a background in economics, Alex has reviewed 800+ ETFs and helped thousands of beginners build their first investment portfolios through clear, jargon-free education.
This content is for educational purposes only and does not constitute financial advice. Past performance does not guarantee future results. Consult a licensed financial advisor before making investment decisions.