What GLD actually is
GLD, or SPDR Gold Shares, is an ETF that holds physical gold bullion. It is managed and marketed by State Street Global Advisors, and it gives you exposure to the gold price without having to buy, store or insure bars yourself.
The fund launched in November 2004, originally under the name streetTRACKS Gold Shares. For a few years it was the second-largest ETF in the world, and it was briefly the largest.
How it works
Each share was originally designed to represent about a tenth of an ounce of gold. The gold is stored as large London Good Delivery bars in vaults in London and with other custodians. To keep the share price close to the price of gold, large institutions can exchange blocks of 100,000 shares for gold, and the other way around.
This is quite different from most ETFs, which hold a basket of stocks. GLD holds a single commodity and owns no income-producing assets.
Costs and income
Physical gold funds generally charge higher fees than stock index funds, because of the cost of storing and insuring bullion. Other gold funds, such as GLDM (also from State Street) and iShares Gold Trust (IAU), compete on fees, so compare current costs.
GLD pays no dividend or interest, because gold produces no income. The only way to make money is for the price of gold to rise, and the only way to get cash out is to sell shares. In the US, gains on physical gold funds may also be taxed differently from stocks, so check your local rules.
What to keep in mind
- No yield. It does not help you build dividend income.
- Volatile. Gold can fall sharply for long stretches.
- Role in a portfolio. Many investors use it as a hedge against inflation and market stress, not as a growth engine.
- Fees. Over a long time, fees on a fund that pays no income add up, so compare alternatives.
Quick take
GLD is a simple way to own gold, but it is the opposite of an income investment. It shows how a holding can be useful in a portfolio even though it pays you nothing.