Monday, January 21, 2013


In the world of U.S. gold Exchange Trade Funds an investor really only has three options:

iShares' Gold Trust (IAU)
SPDR's Gold Shares (GLD)
ETFS' Physical Swiss Gold Shares (SGOL)

The contrasts are well documented and debated (1)(2)(3).  All of these funds are backed by some level of physical holdings, thus exclusive of any day trading the differences can be boiled down to three things: market share, liquidity, and management fees.

Market Share:
Some investors must just feel more comfortable with a larger fund, here's how the gold ETF market looks in terms of daily dollar volume:

GLD is the juggernaut, moving an order of magnitude more than its competitors:

Management Fees:
GLD - 0.4%
IAU - 0.25%
SGOL - 0.39%

Here the long term advantage of lower management fees begins to pay off:

Okay, so the APY-to-Date chart is almost identical, however GLD's management fee keeps it constantly trailing IAU.  SGOL's marginally lower fee perhaps hasn't had enough time to make a break into the positive.  Interestingly, IAU only lowered it's fee in 2010, prior to then the fund still somehow outperformed GLD (2):

SGOL may still be struggling with liquidity issues which affect price, but all things being equal, that 0.01% should eventually pay off.  For the long term investor choosing GLD over IAU, a 0.05% APY-to-Date difference since mid-2004 in a $10k portfolio would represent a loss of almost $150.  Not necessarily large, but not a necessary punishment for seeking split-second liquidity.

No comments:

Post a Comment