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You're Long In The Wrong Physically Backed Gold ETF

Jan. 21, 2016 4:29 PM ETGLD, IAU, SGOL, OUNZ, VIRT, CS, HSBC, BNS, DB, UBS, SCGLY, BCS, C, KCG, RY, RY:CA, BNS:CA19 Comments
FX Metrix, LLC profile picture
FX Metrix, LLC


  • Physically backed gold ETFs all are backed by the same thing, yet they don't trade in lockstep.
  • Each ETF has its own perks and drawbacks from liquidity, to expense ratio, to vault location.
  • Additionally, we list the authorized participants for each ETF to further examine the underlying liquidity for each ETF.
  • We've even included a tax tip at the end for those long a physically backed gold ETF.


There are four different physically backed gold ETFs out there. This drove us to do a side-by-side comparison to help investors determine whether or not they are using the best ETF for their needs.

While there is one main thing in common with these funds, it is the differences that are often overlooked. The moral of the story is that one physically backed gold ETF is not the same as another. The four ETFs in order of AUM are as follows:

  1. SPDR Gold Trust ETF (GLD)
  2. iShares Gold Trust ETF (IAU)
  3. ETFS Physical Swiss Gold Trust ETF (SGOL)
  4. Van Eck Merk Gold ETF (OUNZ)

GLD Chart

data by YCharts

All four ETFs are Grantor Trusts that hold physical gold and seek to track the performance of spot gold. However, as shown above, they have all had slightly different performances on a year to date basis. There are some other minor differences that give each ETF perks and drawbacks.



Price Close 1/20/16:






22.97 B

$5.64 B

$779.47 M

79.56 M

Expense Ratio:





Average $ Volume:

$609.67 M

$85.78 M

$3.35 M

$348.99 K

Average Spread:





Launch Date:





Gold Location:


London, New York, Toronto



Lowest Expense Ratio

For investors with a longer-term investment horizon, the high expense ratios of GLD and OUNZ both at 0.40% and SGOL at 0.39% of AUM annually can really eat into potential gains. Those investors should be considering IAU as a means of gaining physical exposure to gold with an expense ratio of only 0.25%.

Lowest Bid-Ask Spread

For investors who change their mind on investments often, or just happen to be active traders when it comes to physically

This article was written by

FX Metrix, LLC profile picture
FX Metrix, LLC is a developer and publisher of proprietary currency based indices. In addition, we actively research many aspects of the ETF industry.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (19)

Francois Dubois profile picture
What do you think about GAM physical gold class A (JBGOCA) ? Factsheet says fully backed and stored in Switzerland, management fees 0.4%.

Thank you!
Truth-Seeker profile picture
They can claim to be "backed" by gold all they want, every one of these funds is still only "paper gold" from the investor's perspective and dubious at best. GLD alone is even legendary for its "issues" that are not often talked about. Unless you are in real physical bullion like a tax advantaged IRA, you are not truly diversified and are just in more paper. Try californiabullion.com for instance, and consider even holding in a bank deposit box if not an IRA.
Just a tad late :-) but do you know why there are physical gold ETFs but no mutual funds?


CEF? physical and at a discount.
FX Metrix, LLC profile picture
CEF holds both physical gold as well as physical silver, while those compared above are all pure-play physical gold. However, we will look at CEF for inspiration for future research. Thanks!
Thanks for the great article! Yes Sprott Physical gold should have been part of the analysis. So what that it is a closed end fund? If we are trying to see which one to own, the fact that it is a closed end fund should not be too large a factor to exclude in this analysis in my opionion. I chose SGOL earlier for safety reasons, own it, and now I think I will be moving to PHYS. Have been thinking of that even before this article and now I am ready to move! I too have never trusted GLD, and the others are probably not much better. Total expense ratio when you dig into the financial statments on their website looks to be just under 0.50 coutnig Canadian taxes and any expense, so higher than others, but not by that much. I will take security and permanence any day over saving 0.15! Trust is a must. And there are tax beneifts over the other funds as outlined on their website: http://bit.ly/1QjDLPc');
I read the prospectus for SGOL today, it talks a lot about sub-custodians, limit's the trust's legal budget to 100,000, and if I read it correctly says the trust has no recourse if it's cheated by a custodian (or a sub-custodian)

So basically it looks like it's designed to steal gold.

Not buying it.

I think I'll probably just skip the entire precious metals ETF thing- as I they are derivatives, and the problem with derivatives is that you have know way to measuer or protect yourself from counterparty risk.
FX Metrix, LLC profile picture
We will definitely be adding more analysis on various Sprott trusts including PHYS and PSLV in the coming weeks. Glad you enjoyed the article!
tttt1222 profile picture
And WHY no comment on the SPROTT Physical Gold investments? I've read numerous "rumors" that GLD lies about vaulted bullion..a TV show recently, "showing" gold bars was debunked by an observer who notated a serial number on 1 of the bars that had just been purchased for the staged event. A HOAX..believe me, when CHINA opens it's Gold Exchange in April, these Paper ETF's will evaporate faster than a 3rd street junk bond fire sale, and, investors will be frozen from making withdrawals...you've been warned...get out, before you lose everything, and stick to true physical, or SPROTT...
Don't believe me, than read THIS: and THIS:
Perhaps a little sensationalized, but Jim Willie recently commented:

The Gold market cannot be fixed by paper gold on a repeated basis, surely not in perpuity. When the Shanghai shock comes, all the Paper Gold structures will fall, all the FOREX derivatives will collapse, all the control rooms will go into panic mode.
An acute shortage of readily marketable physical gold is developing that we believe will deepen in years to come. This possibility seems to be unrecognized by those who are short the gold market through paper contracts. The relentless dumping of synthetic or paper gold contracts since 2011 by speculators in Western financial markets has caused the shortage. The steady selling has driven down the price of physical gold, hobbled the gold-mining industry, and drained the stores of gold held in the vaults of Western financial centers. We believe that the shortage will worsen because (1) the precursors of production (exploration, discovery, reserve life) are very negative, (2) the mining industry has little financial credibility and seems unlikely to attract capital even with a big rise in gold prices, and (3) refining capacity limitations tend to create supply bottlenecks when physical demand spikes.
nice predictions LOL

Four years later, and those dire predictions of collapsing gold ETFs (trusts) weren't worth the pixels they were displayed on. What a joke. I'm LONG in this deficit-disaster, helicopter money, unwarranted 40% corporate tax cut country....SGOL, CEF, KL and FCX.
@MooGooGuy still waiting... :D
Truth-Seeker profile picture
Gold ETFs are a joke. A joke and a promise. How gullible can people be? Just look at the latest post about GLD over at the Market Manipulation page on Twitter (@MktManipulation) http://bit.ly/1OUrTiW.

Real physical is the way to go, unless you want to speculate in more "paper" gold through stocks or stock funds, which is really apples and oranges. Unless you are investing in real physical bullion, then you are investing in something other than gold.
which of these four actually has the gold it claims to have?
FX Metrix, LLC profile picture
In our opinion: (NYSEARCA:PHYS) which is not listed above due to closed end characteristics, however it is the only physically backed gold fund that is holding 100% allocated gold, as compared with the other four trusts compared above. Read more about it…

thanks I'll check it out. I consider all of these funds "derivatives" of gold...
Truth-Seeker profile picture
You can say that again and more.
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