Gold ETFs: Physical Metal, Futures and What You Actually Own
August 19, 2026 · 2 min read · by ETFWinner Research
Gold funds look interchangeable and are not. The difference between holding metal in a vault and holding futures contracts shows up in your returns.
Gold is the one asset almost every investor has an opinion about and few own efficiently. The ETF structure solved the storage problem, but it introduced a set of choices — physical versus futures, domicile, currency, fee — that materially change what you end up holding.
Physically backed funds
The largest gold funds hold allocated bullion in vaults, with each share representing a fraction of a specific quantity of metal. There is no futures roll, no contract expiry and no tracking drift beyond the fee, which is deducted by selling a tiny amount of gold over time.
That is why the fee is the whole comparison for physically backed funds. IAU at 0.25% against GLD at 0.40% tracks the same metal in the same way — one simply keeps more of it for you.
| Ticker | Fund | Expense | YTD | Yield | AUM |
|---|---|---|---|---|---|
| GLD | SPDR Gold Shares | 0.40% | 15.20% | 0.00% | $65B |
| IAU | iShares Gold Trust | 0.25% | — | — | $30B |
| SLV | iShares Silver Trust | 0.50% | — | — | $12B |
Why futures-based commodity funds differ
Broad commodity funds cannot store oil or wheat, so they hold futures contracts and roll them forward before expiry. When longer-dated contracts cost more than expiring ones, that roll loses money continuously — a structural drag entirely absent from a vault of gold.
This is the single most important distinction in commodity investing, and it explains why a futures-based fund can lag the spot price of the commodity it tracks over years even when the commodity itself has risen.
Local gold funds and currency
Gold is priced globally in dollars, so a gold fund listed in another currency delivers the dollar gold return adjusted by the exchange rate. GOLDBEES in India and GOLD in Australia therefore behave differently from a dollar-denominated fund even though the underlying metal is identical.
For investors in weaker currencies this is often the entire appeal — gold functions as a currency hedge as much as a commodity holding, and the local-currency return reflects both.
What gold does in a portfolio
- It has no yield. No dividends, no interest, no earnings — the only return is price change, which raises the opportunity cost when rates are high.
- It is a currency hedge more than an inflation hedge. Its record against inflation is mixed; its record against currency debasement and crisis is stronger.
- It diversifies unevenly. Correlation with equities is low on average and can turn positive during liquidity crises when investors sell everything.
ETFs mentioned in this guide
SPDR Gold Shares
iShares Silver Trust
Nippon India ETF Gold BeES
ETFS Physical Gold ETF
Frequently asked questions
What is the difference between GLD and IAU?
Both are physically backed by allocated bullion and track the same metal. The main practical difference is the expense ratio, which favours IAU for long-term holders.
Why do commodity ETFs underperform the spot price?
Broad commodity funds hold futures contracts and must roll them forward. When longer-dated contracts cost more than expiring ones, that roll creates a persistent drag.
Is gold an inflation hedge?
Its record against measured inflation is mixed. It has performed more reliably as a hedge against currency weakness and financial crises than against inflation itself.
Does a local-currency gold ETF track gold differently?
Yes. Gold is priced in dollars globally, so a fund listed in another currency delivers the dollar gold return adjusted by the exchange rate.