Gold ETFs: AAAU Offers Lower Fees, While GDX Provides Dividend Income

The choice between Goldman Sachs Physical Gold ETF(NYSEMKT:AAAU) and VanEck Gold Miners ETF(NYSEMKT:GDX) depends on whether an investor seeks direct bullion exposure or the higher volatility of miners.

These two funds offer distinct ways to play the gold market. While one tracks the metal itself, the other follows the companies digging it out of the ground. Understanding the differences in volatility, costs, and dividends is essential for any portfolio allocation in the precious metals space.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500; beta is calculated from five-year monthly returns. The 1-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.

The Goldman Sachs fund is significantly more affordable, charging an expense ratio of 0.18% compared to the VanEck fund’s 0.51%. While the VanEck fund pays a small dividend, the physical gold fund offers no yield.

Performance & risk comparison

What's inside

Goldman Sachs Physical Gold ETF (AAAU) seeks to reflect the performance of the price of gold bullion by holding the physical metal in a trust. Because it holds physical gold rather than equities, it has no traditional top holdings or company-level diversification. This fund was launched in 2018 and paid no dividends over the trailing 12 months.

VanEck Gold Miners ETF (GDX) tracks an index of 57 global gold mining companies, providing 100% exposure to the basic materials sector. Its largest positions include Newmont Corp(NYSE:NEM) at 11.30%, Agnico Eagle Mines Ltd(NYSE:AEM) at 11.12%, and Barrick Mining Corp(NYSE:B) at 8.15%. This fund was launched in 2006 and has a trailing-12-month dividend of $0.63 per share.

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Which looks like the better buy

The Goldman Sachs Physical Gold ETF (AAAU) and the VanEck Gold Miners ETF (GDX) are both exchange-traded funds (ETFs) that focus on gold, albeit in different ways. Here’s how they match up with one another.

First, there’s AAAU. This fund is backed by physical gold, meaning it holds actual gold bullion in trust. As a result, the fund’s price moves in tandem with spot gold prices. Given this basic structure, the fund has no equity holdings and pays no dividends. AAAU charges an expense ratio of 0.18%.

Next, there’s GDX. This fund is focused on the gold mining sector. Rather than holding physical gold, like AAAU, GDX holds equity positions in around 60 gold mining stocks. The fund boasts a dividend yield of 0.7% and has an expense ratio of 0.51%.

Turning to performance, AAAU has generated a total return of 135% over the last five years, with a compound annual growth rate (CAGR) of 18.7%. GDX, by contrast, has generated a total return of 139%, with a CAGR of 19.0%. Both funds have outperformed the S&P 500, which has a total return of 93% over the same period, with a CAGR of 14%.

In summary, these two funds both appeal to investors seeking gold exposure. However, they go about in very different ways. Those investors who want only exposure to the spot price of gold would be better served by AAAU, given its laser focus on the physical gold market and its low expense ratio. Those willing to accept somewhat higher volatility, or those seeking some income from their investment, might prefer GDX, given its slightly better past performance and 0.7% dividend yield.

Jake Lerch has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.