GLDM charges 75% less than GLD for identical gold exposure

Two gold ETFs track the same physical bullion, but one costs a quarter of the other — and the gap compounds.

SPDR Gold Shares has returned 25.38% over the past 12 months, but holders of the $76 billion fund are paying 0.40% a year for exposure that SPDR Gold MiniShares Trust delivers at 0.10%. Both trusts hold allocated physical gold in vaults and track the LBMA Gold Price PM, yet their expense ratios differ by a factor of four.

"The fee gap is the single most predictable driver of relative performance between these two funds," said Geoff Schmidt, a CPA and founder of Holy Schmidt. "GLDM will outperform GLD by roughly the fee difference every year, all else equal."

Over the past year, GLDM returned 25.81% versus GLD's 25.38%. Over five years, the gap widens to 130% versus 127%. On a $100,000 position, the annual fee difference amounts to about $300 — $400 for GLD versus $100 for GLDM — and that gap compounds as gold prices rise. GLD closed at $397.73 on June 16, while GLDM closed at $85.75, giving smaller accounts a lower per-share entry point that leaves less idle cash between purchases.

The decision to switch comes with a tax complication that many investors overlook. Both trusts hold physical bullion, so the IRS taxes long-term gains as collectibles at a maximum rate of 28%, compared with 20% for equity ETFs. After gold's 131.75% five-year run, embedded gains in taxable accounts could make the swap expensive. "Most people also get the tax rate wrong," said Achim von Bodman, a CFP and senior tax manager at Watter CPA. "The 28% rate is not a fixed rate, it is the maximum you will pay." Investors in lower brackets may pay less, while higher earners could face an additional 3.8% Net Investment Income Tax.

Where GLD still earns its fee

GLD's order book remains the deepest in the gold ETF category, and its bid-ask spreads are the tightest. For institutions moving multi-million dollar positions in a single session, slippage in GLDM can erase the expense ratio advantage over a holding period measured in days or weeks. When turnover is high, the liquidity premium tilts back toward GLD.

The tax math on a swap

Inside an IRA or 401(k), switching from GLD to GLDM is mechanically simple and tax-free. In a taxable account, the calculus depends entirely on cost basis. Holders sitting on large unrealized gains after gold's multiyear rally may find that the fee savings take years to outweigh the capital gains bill triggered today. Those closer to break-even face a smaller tax hurdle. For new contributions to a gold sleeve, GLDM captures the fee gap from day one with no tax friction.

For buy-and-hold gold exposure in tax-advantaged accounts, GLDM offers the same underlying metal at a quarter of the annual cost. For active traders, GLD's liquidity advantage remains the deciding factor. The right choice depends on holding period, account type, and the size of embedded gains — not on which fund holds the gold.

This article is for informational purposes only and does not constitute investment advice.