Choosing Between Physical Gold ETFs and Mining Stock ETFs: A Performance Comparison

When it comes to investing in gold, two dominant options have captured investor attention: SPDR Gold Trust ETF (GLD) and VanEck Gold Miners ETF (GDX). But which represents the best gold index fund for your portfolio?

Recent Performance Tells a Different Story

The contrast in returns is striking. Since January, GLD has delivered a solid 15.6% gain, while GDX has surged 32.3%—more than double the performance. This gap underscores a fundamental truth about precious metal investing: the path you choose dramatically affects your outcomes.

The reason? GLD tracks physical gold bullion, while GDX provides exposure to companies that extract it. This structural difference creates vastly different risk-return profiles.

Why Gold Itself Is Rallying

Gold has reached record highs four times in just five days, surpassing $3,050, driven by multiple tailwinds:

Trade and Geopolitical Uncertainty - Escalating tariff disputes threaten economic stability and fuel inflation concerns. Simultaneously, stalled Russia-Ukraine negotiations and intensified Middle East airstrikes drive investors toward safer assets. Gold thrives in such environments.

Central Bank Accumulation - The World Gold Council reported that global central banks accumulated over 1,000 tons of gold last year for the third consecutive year. China extended its buying streak for four consecutive months through February, signaling sustained institutional demand.

Currency Dynamics - The U.S. dollar index recently hit a five-month low, making gold cheaper for international buyers and boosting demand.

Interest Rate Expectations - Fed officials signaled potential rate cuts by year-end. Since lower rates reduce the opportunity cost of holding non-yielding assets like bullion, this outlook propels gold higher. Conversely, gold typically struggles when rates rise, as bonds and other fixed-income investments become more attractive.

Comparing the Two ETFs: Structure and Performance

SPDR Gold Trust ETF (GLD) holds $87.4 billion in assets and trades approximately 8 million shares daily. With a 40 basis point annual fee, it directly owns physical gold bullion stored in London vaults under HSBC custody. Each share represents a fractional claim on actual gold.

VanEck Gold Miners ETF (GDX) manages $14.8 billion and trades roughly 17 million shares per day. Charging 51 basis points annually, it tracks the NYSE Arca Gold Miners Index across 63 mining companies. Canadian firms comprise 44.6% of holdings, followed by the United States (16.5%) and Australia (11.1%).

Understanding the Risk-Return Tradeoff

GLD offers pure gold exposure—stable, inflation-hedging, and free from company-specific risks. However, it generates no income stream and depends entirely on price appreciation.

GDX operates differently. Mining companies possess operational leverage: when gold prices rise modestly, mining profits can expand significantly. This amplifies returns during bull markets. Additionally, many mining stocks pay dividends. Yet this leverage cuts both ways—downturns hit miners harder than bullion itself. Company-specific challenges, management decisions, and production disruptions introduce volatility absent from physical gold holdings.

Which Represents the Best Gold Index Fund for You?

Choose GLD if: You prioritize wealth preservation, seek inflation protection, or want to hedge against financial and political turmoil. Its stability makes it suitable for conservative portfolios.

Choose GDX if: You’re comfortable with higher volatility and seek maximum upside potential. The past five weeks demonstrate GDX’s superior gains, rewarding those who can tolerate fluctuations.

Gold’s record-setting performance reflects genuine macroeconomic pressures. Whether you select the best gold index fund for physical bullion or mining exposure depends on your risk tolerance and investment horizon—not the asset class itself.