Physical Gold vs Mining Stocks: Which Gold ETF Strategy Wins This Year?

Gold’s momentum shows no signs of slowing. In just five days, bullion has hit record highs four times, smashing through the $3,050 barrier. The tailwinds are clear: trade tensions pushing investors toward safe-haven assets, geopolitical instability in Europe and the Middle East, plus Federal Reserve signals hinting at rate cuts before year-end. Against this backdrop, two gold investment vehicles are drawing serious attention.

SPDR Gold Trust ETF (GLD) has gained 15.6% year-to-date, while VanEck Gold Miners ETF (GDX) has surged 32.3%—nearly double the returns. But raw performance numbers tell only half the story. Understanding what drives these divergent results matters far more.

Why Gold Is Having Its Moment

The current rally rests on three pillars. First, trade tariff disputes threaten to inflate prices across the economy, making gold an increasingly attractive wealth preservation tool. Second, lower interest rates reduce the opportunity cost of holding non-yielding bullion, making the metal more attractive relative to bonds and other fixed-income instruments. Third, central banks are buying aggressively—China extended purchases for a fourth consecutive month in February alone. According to the World Gold Council, global central banks accumulated over 1,000 tons of gold for the third straight year in 2024.

Beyond institutional buying, geopolitical friction matters. Russia-Ukraine ceasefire negotiations have stalled, and Israel’s intensified military operations continue to unsettle markets. Whenever uncertainty spikes, capital rotates toward gold as insurance.

The Two Paths: Direct vs Indirect Exposure

GLD tracks physical gold. This $87.4 billion behemoth holds actual bullion stored in London vaults under HSBC custody. Each share represents a slice of that bullion. With 8 million shares trading daily and a 40 basis-point annual fee, it’s the vanilla choice—simple, liquid, and predictable.

GDX bets on mining companies instead. This $14.8 billion fund holds 63 mining stocks and follows the NYSE Arca Gold Miners Index. Daily volume hits 17 million shares, making it highly liquid too. But here’s where it gets interesting: while GLD charges 40 bps annually, GDX costs 51 bps—only marginally more, yet delivers dramatically different economics.

The portfolio reveals a geographic concentration worth noting. Canadian firms represent 44.6% of holdings, followed by U.S. companies at 16.5% and Australian miners at 11.1%. For those tracking the best gold ETF options in Canada specifically, GDX offers meaningful exposure to the nation’s mining powerhouses.

Why GDX Doubles GLD’s Gains

Operating leverage explains the divergence. When gold prices rise modestly, mining company profits expand dramatically. A 5% gold price increase might translate into 15-20% profit growth for miners—especially during bull markets. That’s because mining companies have fixed costs; incremental gold production flows almost entirely to the bottom line.

GLD, conversely, moves in lockstep with bullion prices. No leverage, no upside surprise, but also no downside whip.

There’s a second factor: GDX sometimes pays dividends from mining operations, creating a secondary income stream. Plus, investors gain exposure to company-specific growth stories and management execution—factors independent of gold’s price trajectory. But this advantage cuts both ways. Company-specific risks, exploration failures, or operational mishaps can drag individual holdings lower even when gold rallies.

The Volatility Trade-Off

GLD is the stability play. It’s backed by physical metal, carries zero company-specific risk, and moves predictably. Investors seeking straightforward inflation protection or a portfolio hedge gravitate here naturally.

GDX demands a higher risk tolerance. Leverage swings harder both ways. During gold bull markets, GDX crushes GLD. During corrections, it falls faster. Mining stocks also respond to broader equity market sentiment—when equities tumble, miners often underperform even if gold holds steady.

Making Your Choice

Investors prioritizing capital preservation and seeking a pure inflation hedge should anchor to GLD. Investors hunting for maximum upside and comfortable with 30-40% annual swings should consider GDX. Those wanting exposure to the best gold ETF opportunities across geographies—particularly Canada’s dominant mining sector—will likely find GDX’s portfolio construction compelling.

The answer isn’t which ETF is objectively “better.” It’s which matches your timeline, risk tolerance, and return expectations. Bull markets reward the volatility. Uncertain markets reward the stability.