GLD Offers Safer Gold Exposure Than SGDM, but SGDM Has Outperformed Recently

Sprott Gold Miners ETF (NYSEMKT:SGDM) and SPDR Gold Shares (NYSEMKT:GLD) both offer gold exposure, but SGDM holds gold mining companies while GLD tracks the price of physical gold, leading to significant differences in risk, performance, and trading liquidity.

This comparison unpacks how those differences play out in costs, returns, risk, and what actually sits inside each ETF.

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.

GLD comes with a slightly lower expense ratio, making it more affordable to hold over the long term, while SGDM charges a bit more for its active gold miner exposure. Yield is not a factor here, as GLD does not pay a dividend and SGDM’s payout is modest.

Performance & risk comparison

What's inside

GLD is a physically backed gold ETF, designed to mirror the spot price of gold bullion with minimal tracking error. The fund is highly liquid, with more than $155 billion in assets under management and over 21 years of trading history, making it a mainstay for investors seeking direct gold exposure. GLD does not hold stocks or bonds, just gold bars stored in secure vaults, and its structure may appeal to those wanting to bypass the operational risk of mining companies.

SGDM, on the other hand, invests entirely in gold mining equities, with 100% allocation to the basic materials sector. Its top holdings include Agnico Eagle Mines Ltd., Barrick Mining Corp., and Newmont Corp., all large-cap miners whose performance can be more volatile than gold itself. While this can amplify both gains and losses compared to bullion, it may also provide some modest dividend income, unlike GLD.

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What this means for investors

Investing in gold is often seen as a way to diversify an investment portfolio with a safe-haven investment that stands up to market volatility and economic uncertainty. But there are different ways for investors to gain exposure to gold, from holding and storing physical gold bars to investing in gold-related equities, like GLD or SGDM.

The price of gold has risen about 50% over the last year. GLD’s 49% return largely follows the price movement of the precious metal, minus the fund’s management fee. But SGDM has returned twice as much, at more than 100% over the last year, because of its focus on gold miners, rather than the material itself. Yet SGDM also has the potential to disappoint, as evidenced by its much larger five-year max drawdown compared to GLD. This is because gold miners are companies, and therefore have to contend with all of the associated risks, including balance sheet management, corporate governance, and interest rates that can affect the cost of borrowing money.

GLD and SGDM are both solid ways to gain exposure to gold, and choosing between the two will likely come down to your individual investment style and goals. That said, if you’re looking to diversify further, you may consider putting a little money into both options.

Sarah Sidlow 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.