Which Gold ETF Is the Better Buy: iShares' IAU or State Street's GLD?

The primary distinction between iShares Gold Trust (NYSEMKT:IAU) and SPDR Gold Shares (NYSEMKT:GLD) is cost, as both funds provide nearly identical exposure to physical gold bullion prices. For many long-term investors, the lower annual fee of the iShares fund makes it a compelling choice for portfolio diversification.

Gold often acts as a critical diversifier in a portfolio dominated by stocks and bonds. These two exchange-traded funds provide a highly efficient way to gain exposure to the metal price movements without the logistical challenges of personal storage. This comparison helps clarify which trust might better fit your specific investment goals by analyzing their annual fees, total scale, and historical volatility.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500; beta is calculated from monthly returns over the available fund history (up to five years). The 1-yr return represents total return over the trailing 12 months.

The iShares Gold Trust is clearly the more affordable option for long-term investors who intend to buy and hold. Its 0.25% expense ratio is significantly lower than the 0.4% fee charged by its competitor, and these savings can be substantial when compounded over 10 or 20 years. For core portfolio allocation, minimizing recurring costs is often the most reliable path to maximizing net returns over time.

Performance & risk comparison

The SPDR Gold Shares aims to mirror the market price movements of physical gold bullion. It was launched in 2004. This pioneering fund was the first gold exchange-traded fund to be introduced in the U.S. and also the initial U.S.-listed ETF to be backed by a tangible asset. Because of its massive scale and high average daily trading volume, it is often the preferred choice for institutional traders. Over the past year, its price has fluctuated between $305 and $509.

The iShares Gold Trust also focuses on the daily performance of the price of gold bullion as its primary objective. Its portfolio consists of physical gold at 100%. It was launched in 2005. The fund manages a significant $64.2 billion in assets under management (AUM), providing ample liquidity for the vast majority of retail investors. While it arrived slightly later than its rival, it has become a staple for those prioritizing cost-efficiency over sheer trading volume. The fund share price has ranged from $62 to $104 over the last 52 weeks.

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Which looks like the better buy

Gold became one of the most sought-after assets of the past two years as investors looked for protection against inflation, currency weakness, and global uncertainty, pushing prices to historic highs. For investors who missed that rally and are now considering their entry point, IAU and GLD are the two most straightforward ways to own it.

The choice between them is one of the simplest in the ETF universe. Both funds hold physical gold bullion in secure vaults, track the same gold price, pay no dividends, and move in perfect lockstep. So the only decision that matters is cost and scale.

IAU charges less than GLD, and over a decade that difference has translated into slightly better returns for IAU holders. That's exactly what you would expect when two funds hold identical assets at different price points. GLD's case rests on its scale and liquidity: It manages roughly twice the assets of IAU and dominates the gold options market, making it the preferred vehicle for institutional traders and sophisticated investors who need to move large positions efficiently. For most long-term buy-and-hold investors, IAU's lower fee makes it the better buy.

Sara Appino has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.