How Do Gold ETFs Work? What GLD Holds and What It Costs

When GLD (the gold exchange-traded fund, or ETF) launched in November 2004, each share was backed by 0.1 ounces of gold. On 6 October 2026, each share was backed by 0.0917 ounces.

The gold did not go missing. The fund sold it, a little each month, to pay its yearly fee. Here is how a gold ETF works: what GLD owns, how its price follows gold, what it costs and how it compares with bars and coins.

An ETF is a fund whose shares trade on a stock exchange through the day, like a company's shares. A gold ETF holds gold itself. We explain ETFs in What Is an ETF? and compare them with index funds in Index Funds vs ETFs.

GLD is a trust set up under New York law. Its shares started trading on 18 November 2004. Its aim is for the shares to reflect the price of gold, less the trust's expenses.

New GLD shares are made only in blocks of 100,000. Large dealers, called authorised participants, hand the trust gold for shares, or shares for gold. The trust does not deal with the public, so an ordinary holder sells shares on the exchange.

GLD's gold is held by two custodians, the banks that look after it: JPMorgan Chase and HSBC. The bars sit in their vaults in London and New York.

The gold is allocated. That means each bar belongs to the trust and is listed by serial number, purity and weight. The fund says its gold is never lent out.

Each bar is a London Good Delivery bar, the London market's standard: 350 to 430 ounces of gold, at least 99.5% pure. Bureau Veritas, an inspection firm, checks the gold twice a year: one full count and one sample count.

On 6 October 2026, GLD held 34.1 million ounces, or 1,060 tonnes.

There is one gap. The trust does not insure its gold. The custodians' own insurance does not cover the full amount, the fund says.

Each trading day, the trustee values the gold at the LBMA Gold Price PM, the afternoon (PM) benchmark price. LBMA stands for the London Bullion Market Association. The price is set in an electronic auction at 3:00 p.m. London time.

GLD's shares trade all day at whatever price buyers and sellers agree. If the share price drifts above the gold's value, dealers can deliver gold for new shares and sell them. If it drifts below, they do the reverse. Those trades pull the price back.

From 7 October 2025 to 6 October 2026, GLD's share price at 4:15 p.m. New York time was within 0.25% of the value of its gold on 250 of 251 trading days.

GLD charges a fee of 0.40% a year. The fee builds up daily and covers the trust's running costs, including the vault fees. The trust holds no cash, so the trustee sells a small amount of gold each month to pay it.

Chart 1 shows the gold behind one GLD share on each trading day. It started at 0.1 ounces on 18 November 2004. By 6 October 2026 it was 0.0917 ounces, 8.3% less.

A fee of 0.40% a year, compounded over those 21.9 years, comes to 8.4%. That matches the 8.3% drop almost exactly. So the fee explains the drop. The line falls at a steady rate because the same share of the gold goes each year.

Chart 2 sets GLD's share price against the World Bank's gold price, both at 100 in December 2004. Both lines use monthly averages, with gold in dollars an ounce.

From December 2004 to September 2026, gold rose from $442 to $4,319 an ounce, a gain of 877%. GLD rose 794%. That is 11.0% a year for gold and 10.6% a year for GLD, after rounding.

Before rounding, the gap is 0.45 points a year. That is close to the 0.40% fee.

Chart 3 shows the yearly fee on a $10,000 holding. It is $40 for GLD, $25 for IAU (the iShares Gold Trust) and $10 for GLDM (SPDR Gold MiniShares). All three hold physical gold and value it at an LBMA Gold Price, according to their issuers.

Over 20 years at today's fees, GLD would use up about 7.7% of the gold behind each share. IAU would use about 4.9%, while GLDM would use about 2.0%.

GLD is the largest of the three. On 6 October 2026, its net assets were $141.6 billion, against $61.9 billion for IAU and $30.9 billion for GLDM.

Source: SPDR Gold Trust Form 10-Q (quarter to 30 June 2026) and FAQ (January 2026); The Royal Mint

Bars and coins put the gold in your own hands, along with its costs.

A gold ETF has costs too: the yearly fee, plus the gap between the buying and selling price of its shares. GLD's vault costs are paid from its fee, so every holder shares them.

GLD is listed in the US. On the London Stock Exchange, gold can be bought as an exchange-traded commodity (ETC). An ETC is a debt security: a note issued by a company, here backed by physical gold. So it is not a fund.

The iShares Physical Gold ETC charges 0.12% a year and can be held in an Individual Savings Account (ISA), according to iShares.

In the UK, investment gold is exempt from VAT. That covers bars at least 99.5% pure. It also covers gold coins minted after 1800 that are at least 90% pure and are or were legal tender, under HM Revenue and Customs (HMRC) VAT Notice 701/21.

Capital Gains Tax depends on the coin. HMRC's manual says sovereigns minted from 1837 and Britannia gold coins are sterling currency, so they are exempt. Krugerrands are currency, but not sterling, so gains on them are taxable.

No tax is due on gains inside an ISA. This is general information, not tax advice.

A few checks help:

A gold ETF turns gold bars in a vault into shares that trade like any other. Its price tracks gold closely, while the yearly fee slowly trims the gold behind each share.

This explainer is part of the YX Insights Academy. Each one takes a single idea and checks it against real data.

The same approach runs through everything else we publish:

Good places to start on the website:

Yes, a physically backed gold ETF owns real gold bars. At 30 June 2026, 100% of GLD's gold was allocated London Good Delivery bars held by JPMorgan Chase and HSBC, according to its quarterly report. Each bar is listed by serial number. Bureau Veritas, an inspection firm, checks the bars twice a year.

No, an ordinary holder cannot. GLD swaps shares for gold only with large dealers, called authorised participants, in blocks of 100,000 shares. The trust does not deal with the public. A holder who wants to leave sells the shares on the stock exchange, at the market price.

Physically backed gold ETFs pay no dividends, because gold earns no income. GLD has never paid one since it started in November 2004. Its fee is paid by selling small amounts of gold each month. So the gold behind each share falls a little every year, from 0.1 ounces at launch to 0.0917 ounces on 6 October 2026.

Of the three US gold ETFs in this guide, GLDM has the lowest fee, at 0.10% a year. IAU charges 0.25% and GLD charges 0.40%. On a $10,000 holding, that is $10, $25 and $40 a year. In London, the iShares Physical Gold ETC charges 0.12%, according to iShares.

On storage, yes. GLD's fee of 0.40% a year, which covers its vault costs, is lower than The Royal Mint's vault charge. The Royal Mint charges 1% a year plus VAT to store coin tubes and bars, or 1.2% in total. Coins and bars also sell at a premium over the gold price.

DISCLAIMER: This article is strictly educational. Any information or analysis in this note is not an offer to sell or the solicitation of an offer to buy any securities. Nothing in this note is intended to be investment advice and nor should it be relied upon to make investment decisions. Any opinions, analyses, or probabilities expressed in this note are those of the author as of the note's date of publication and are subject to change without notice.