Key Takeaways
- Gold ETFs are the cheapest, most liquid way to get gold price exposure. But their expense ratios vary from roughly 0.07% to 0.50%, a difference that compounds into real dollars over time.
- Physically-backed gold ETFs (like GLD, IAU, and PHYS) track spot gold. Gold miner ETFs track mining companies, which can amplify both gains and losses relative to the metal itself.
- PHYS (Sprott Physical Gold Trust) has a different tax structure than most ETFs: gains may qualify for long-term capital gains rates for U.S. investors rather than the 28% collectibles rate, but this depends on your situation. Verify with a tax professional.
- You can buy gold ETFs on virtually any brokerage, including Robinhood, though Robinhood lacks the IRA accounts that would let you defer or eliminate the tax on those gains.
- Compare Gold IRA companies and fees
The Short Version on Paper Gold
Here’s the short version: if you want gold price exposure without a vault, a custodian, or a dealer charging you 8% over spot, gold ETFs are how most investors should do it. You buy shares through a regular brokerage account the same way you’d buy any stock. The ETF holds the metal. Or the mining companies. On your behalf.
That said, not all gold ETFs work the same way, the tax treatment is more complicated than the marketing admits, and the difference between a physically-backed gold fund and a gold miner fund is the difference between betting on the price of gold and betting on the management teams and balance sheets of companies that dig it out of the ground. Those are genuinely different bets. This piece walks through both.
Physically-Backed Gold ETFs: What You’re Actually Buying
When you buy shares in GLD (SPDR Gold Shares) or IAU (iShares Gold Trust), you’re buying a fractional claim on physical gold bars held in a custodial vault. GLD’s custodian is HSBC Bank plc in London; IAU’s is JPMorgan Chase Bank. Both funds publish their bar lists. Serial numbers, weights, assay marks. And both are audited regularly. The SEC regulates these funds as registered investment companies. SIPC covers the brokerage account holding your shares. The metal itself is not SIPC-insured, but it’s held in allocated, segregated form.
The practical differences between funds come down to three things:
Expense ratio. GLD charges 0.40% annually. IAU charges 0.25%. IAUM (iShares Gold Trust Micro) charges 0.09%. On a $50,000 position held for 10 years, the difference between 0.40% and 0.09% is roughly $1,500 in fees, compounded. GLD’s lower cost isn’t liquidity. It’s the largest gold ETF in the world and trades billions of dollars a day. The fee gap is just legacy pricing.
Share price and fractional ownership. GLD’s share price represents about 0.0925 troy ounces of gold. IAU represents about 0.01 troy ounces. This used to matter for accessibility; with fractional shares available at most brokerages now, it matters less.
Tax structure. Both GLD and IAU are grantor trusts. The IRS treats gains as collectibles, taxed at a maximum rate of 28%, even if you hold the shares for more than a year. Compare that to a long-term capital gain on a stock held more than a year, which maxes at 20% for most high earners. The collectibles rate is a real cost. Factor it into your after-tax return math.
PHYS: The Sprott Trust and the Tax Election Worth Understanding
Sprott Physical Gold Trust (PHYS) is a Canadian closed-end fund that trades on NYSE Arca. Like GLD and IAU, it holds allocated physical gold. Unlike GLD and IAU, it’s structured as a Passive Foreign Investment Company (PFIC) for U.S. tax purposes.
Here’s where it gets interesting. A PFIC sounds worse than a grantor trust. PFICs carry notoriously punishing tax treatment by default. But U.S. investors who make a Qualified Electing Fund election (the QEF election, filed with their tax return) can potentially have their PHYS gains taxed at long-term capital gains rates rather than the 28% collectibles rate. For an investor in the 20% long-term rate bracket, that’s 8 percentage points of tax savings on every gain.
The catch: the QEF election is not automatic. You have to file IRS Form 8621 with your return for the first year you hold PHYS. Miss it, and you’ve defaulted into the punishing PFIC regime. Sprott publishes an Annual Information Statement each year with the data Form 8621 requires. This is not a casual paperwork ask. It adds a form and some math to your tax filing. Whether the potential tax savings justify that complexity depends on your tax rate, your position size, and how long you plan to hold. This is the kind of thing to discuss with a tax professional rather than wing it.
PHYS also trades at a premium or discount to its net asset value, like any closed-end fund. GLD and IAU are structured to trade very close to NAV through the creation/redemption mechanism. PHYS can trade at a meaningful discount, which can be an opportunity or a sign the market has concerns about liquidity.
Gold Miner ETFs: Leverage Without the Loan
GDX (VanEck Gold Miners ETF) and GDXJ (VanEck Junior Gold Miners ETF) don’t hold metal. They hold shares in gold mining companies. GDX’s top holdings include Newmont, Barrick Gold, Agnico Eagle, and Wheaton Precious Metals. GDXJ holds smaller companies. The exploration and development firms that are earlier in their production cycle and carry more operational uncertainty.
The miner leverage dynamic is real and worth understanding mechanically. Say gold is at $1,800 an ounce and a miner’s all-in sustaining cost (AISC) is $1,200. The miner earns $600 per ounce. Gold rises 10% to $1,980. Revenue per ounce jumps to $780. A 30% increase in margin. The operating leverage amplifies the move. The same math works in reverse: gold falls 10% to $1,620, and margin drops to $420, a 30% decrease.
This is why GDX historically moves roughly 2x to 3x the daily percentage move in gold. GDXJ’s smaller companies move even more. That amplification is not free. It comes with company-specific risks the price of gold alone doesn’t carry: hedging decisions (a miner that locks in forward sales misses the upside when gold spikes), geopolitical risk in the jurisdiction where the mine operates, labor disputes, environmental regulations, and balance sheet quality. The 2020 COVID crash briefly wiped 40% off GDX in a few weeks; gold fell maybe 12% in the same period.
For investors who believe gold is heading higher and want to amplify that bet, miner ETFs are the vehicle. For investors who want a store-of-value hedge with minimal company-specific noise, physically-backed ETFs are cleaner.
The Tax Wrapper That Changes Everything
Gold ETFs held inside a Roth IRA sidestep the collectibles tax problem entirely. Inside a Roth, gains grow tax-free, and qualified withdrawals in retirement are tax-free. The 28% collectibles rate doesn’t reach into a Roth account. For a long-term holder who expects gold to appreciate, the Roth wrapper for a gold ETF position is significantly more efficient than a taxable brokerage account.
A traditional IRA works too. Gains are deferred, and withdrawals are taxed at ordinary income rates. Whether deferral and eventual ordinary income is better than the 28% collectibles rate depends on your expected tax rate in retirement.
Virtually any full-service brokerage. Fidelity, Schwab, and others with broad IRA menus. Allows gold ETFs in IRAs. Robinhood offers Roth, traditional, and rollover IRAs, so yes, you can hold a gold ETF in a Robinhood Roth IRA. The platform limitations at Robinhood (no SEP-IRA, no inherited IRA accounts, limited options for complex situations) matter more for retirement savers with those needs.
This is not the same as a Gold IRA. A Gold IRA is a self-directed IRA that holds physical metal, requires an IRS-approved custodian (Equity Trust, STRATA, and similar firms), requires storage at an IRS-approved depository (Delaware Depository, Brink’s), and carries a fee stack. Setup fees, annual custodian fees, storage fees, and a dealer markup over spot that can run 5% to 15% on common coins. A gold ETF held in a regular Roth IRA costs you the fund’s expense ratio and your brokerage’s trading commissions (typically zero at major brokerages). For most investors, that’s the better math. If you’re comparing options across custodians, checking the best gold IRA companies can surface what the full fee stack looks like at each provider.
Buying Gold ETFs on Robinhood and Other Platforms
Gold ETFs trade on major U.S. exchanges, which means you can buy them anywhere you can buy a stock. GLD, IAU, GDX, GDXJ, and PHYS are available on Robinhood, Fidelity, Schwab, Vanguard’s brokerage, and every other major retail platform. The mechanics are identical to buying any equity: enter the ticker, enter a share count or dollar amount, choose market or limit order, confirm.
A limit order is the slightly more disciplined approach during volatile gold markets. Gold moves quickly on macro news, and a market order during a spike can fill meaningfully above the prior price. For large positions, a limit order set near the current bid gives you price certainty.
One thing to verify before you buy: whether fractional shares are available on your platform for the specific ETF you want. PHYS in particular has a lower share price that makes fractional shares less critical, but GLD trading above $200 per share means fractional access matters for smaller accounts.
What Individual Gold Stocks Actually Involve
If you’re interested in individual mining companies rather than diversified ETFs, the research process looks more like equity analysis than commodity analysis. You’re looking at AISC, reserve estimates, geographic footprint, balance sheet leverage, hedging policies, and management track record. A company that hedged 40% of its production forward at $1,750 per ounce when gold is at $2,400 is leaving money on the table in a way that the gold ETFs and the metal itself don’t.
Newmont and Barrick are the two largest gold miners globally and are the most liquid individual gold stocks on U.S. exchanges. Both are in GDX and GDX’s top holdings, which is one reason some investors prefer the ETF. Diversification across producers reduces the impact of a single company’s operational problems.
Smaller exploration companies, often called juniors, are speculative. They may hold promising deposits with no current production, and their stock prices are driven more by resource estimates and capital raises than by the gold price itself. These are legitimate investments for investors who understand the binary risk profile. They’re also frequently the subject of promotional campaigns. The SEC has brought multiple enforcement actions against promoters of junior mining stocks. If a company appears in your inbox or on a financial social media feed promising transformative upside in an obscure miner, that’s a pattern worth recognizing.
For most people shopping for gold exposure, the ETF route is cleaner. For investors who want to research and own individual companies, the best financial advisors who specialize in natural resources or commodities are better positioned to evaluate specific names than a generic brokerage recommendation.
The Honest Case Against Paper Gold
The critics of gold ETFs. Usually precious metals dealers, and you’ll notice the conflict. Make two arguments. First, that you don’t own real gold. Second, that in a true financial crisis, your ETF shares might not be redeemable for physical metal.
On the first point: GLD and IAU hold allocated, audited, physical bars. You own a pro-rata share of those bars. The bars don’t have your name on them, but they’re not lent out, they’re not hypothecated, and they’re not balance sheet entries at a bank. The published bar list runs hundreds of pages.
On the second point: yes, there are crisis scenarios in which redemption in physical metal might be complicated. GLD’s prospectus. Which you can read on the SEC’s EDGAR database. Describes the redemption mechanism as being available only to authorized participants in large baskets, not to individual retail investors. In a genuine systemic failure, the retail holder of GLD doesn’t walk into an HSBC vault and collect bars. That’s true. It’s also true that in the scenarios extreme enough to make that a realistic concern, the logistics of physical gold ownership create their own complications.
The case for physical metal is a separate conversation from the case for gold ETFs. Physical metal via a Gold IRA or home storage addresses the counterparty question but adds the fee stack, storage logistics, and dealer markup problem. Gold ETFs are for investors who want price exposure in a liquid, low-cost vehicle. They’re not a substitute for those who want physical metal in hand. Both are legitimate positions. They’re just different products solving different problems.
