GLD tracks physical bullion with lower volatility; GDX leverages mining stocks. Compare fees, returns, and tax rules for the gold rally.
Gold has rallied sharply over the past year. Spot gold trades near $4,070 an ounce, up about 20% from 52 weeks ago. The metal hit $5,608 in January before pulling back. Investors looking for ETF exposure have two main options: physical bullion through SPDR Gold Shares (GLD) or mining stocks through VanEck Gold Miners ETF (GDX). The choice depends on volatility tolerance, tax treatment, and time horizon.
GLD holds physical gold bars in vaults. The fund tracks the spot price with a 0.4% expense ratio. It was launched in 2004 and remains the largest physically backed gold ETF. GDX tracks the MarketVector Global Gold Miners Index, which holds about 57 mining stocks. Its largest positions include Newmont Corp at 10.5% and Agnico Eagle Mines at 10.5%. The expense ratio is 0.51%.
Performance differs across time frames. Over the past three months, GLD fell 6.7% while GDX dropped 12.4%. The mining fund's leverage cuts both ways. When gold prices rise, miners' profits often grow faster than the metal's price because operating costs don't rise as quickly. That dynamic has helped GDX deliver higher annualized returns over longer periods. The fund returned 37.5% over three years and 19% over five years, compared with 27.7% and 17.5% for GLD. Over ten years, GDX returned 11.6% versus 11.4% for GLD.
Tax treatment is a key difference for U.S. investors. GLD is classified as a collectible, so long-term gains are taxed at a top rate of 28% rather than the 20% rate for equities. Short-term gains are taxed as ordinary income. GDX, as a stock ETF, receives standard capital gains treatment. Holding either fund in a tax-advantaged account like an IRA sidesteps these issues.
GDX also pays a dividend from the underlying mining stocks. GLD does not distribute income. Studies show that gold's price drives the majority of mining stock returns, so GDX tends to track the metal closely over time.
AlphaScala's proprietary scoring rates GLD at 28 out of 100, a Weak label. Newmont, a top GDX holding, scores 59 out of 100, rated Moderate. The scores reflect current risk and momentum factors.
The gold rally has drawn broad attention. Physical ETFs offer direct price exposure with lower day-to-day volatility. Mining stock ETFs offer higher potential returns but carry company-specific risks like operational costs and geopolitical exposure. In the past three months, the pullback from January highs has hit miners harder than bullion.
Prepared with AlphaScala editorial tooling from the source reporting linked above. Indexable analysis may include a cited Alpha Score value. Publishing checks screen each story before release. Educational coverage, not personalized advice.