Comparing Gold Bullion and Mining Stock ETFs: A Guide for Canadian Investors

When it comes to gaining exposure to gold in Canada, investors face a fundamental choice between two distinct approaches: direct gold ownership through bullion-backed ETFs or indirect exposure via mining company shares. GLD (SPDR Gold Trust ETF) and GDX (VanEck Gold Miners ETF) represent these two paths, each with different risk-return profiles suited to different investment objectives.

Current Market Performance

The precious metals space has experienced a significant upswing recently. Since the beginning of the year, GLD has delivered a 15.6% return, while GDX has surged ahead with a 32.3% gain. This performance disparity reflects the different underlying dynamics of each fund and reveals important insights about which may be better suited for certain investor profiles.

Why Gold is Rallying Right Now

Multiple factors are propelling gold prices upward. Trade tariff uncertainties are raising inflation concerns, making gold’s traditional role as an inflation hedge more relevant. Geopolitical instability—including stalled Russia-Ukraine negotiations and increased Middle East tensions—continues to drive safe-haven demand. Central banks remain aggressive buyers, with China extending its purchasing streak for four consecutive months, while global central banks accumulated over 1,000 tons annually for the third consecutive year.

Monetary policy developments also support gold. Recent Federal Reserve communications have signaled potential rate reductions later this year. Since gold is a non-yielding asset, lower interest rates diminish the opportunity cost of holding it and boost its relative attractiveness compared to fixed-income investments. The weakening U.S. dollar—now near five-month lows—further enhances gold’s international appeal.

Global gold demand reached record levels in 2024. Investment demand alone jumped 25% year-over-year, indicating broad-based investor interest beyond just central bank accumulation.

Understanding GLD: Pure Gold Exposure

SPDR Gold Trust ETF (GLD) provides direct exposure to physical gold bullion stored in London vaults under HSBC custodianship. With $87.4 billion in assets under management and approximately 8 million daily shares traded, GLD ranks among the most liquid gold vehicles available.

The fund charges 40 basis points annually. Each share represents a specific quantity of gold bullion, offering investors a straightforward way to own gold without dealing with physical storage complexities. GLD carries a Zacks ETF Rank of 3 (Hold) with medium risk characteristics.

For investors prioritizing stability, inflation protection, and a hedge against uncertainty, GLD eliminates company-specific risks entirely. The fund generates no dividend income, but that simplicity appeals to those seeking pure commodity price exposure.

Understanding GDX: Mining Company Exposure

VanEck Gold Miners ETF (GDX) takes a different route by investing in companies that extract gold. With $14.8 billion in AUM and approximately 17 million daily shares traded, this fund holds 63 mining stocks from across the globe.

The geographic breakdown reveals significant Canadian exposure: Canadian firms represent 44.6% of the portfolio, with the United States (16.5%) and Australia (11.1%) forming the next largest segments. This geographic weighting makes GDX particularly relevant for Canadian-based investors seeking mining sector exposure. The fund charges 51 basis points annually and tracks the NYSE Arca Gold Miners Index.

The Performance Advantage of Mining Stocks

Mining companies exhibit operating leverage relative to gold prices. When bullion prices rise modestly, mining company profits can expand substantially due to fixed operational costs spread across increased output. This is why GDX has significantly outpaced GLD’s year-to-date returns.

Additionally, mining ETFs may distribute dividends and offer exposure to company-specific growth initiatives beyond simple commodity price appreciation. However, this upside potential comes paired with higher volatility and risks tied to individual mining operations, management decisions, and company-specific challenges.

The Trade-Off Between Growth and Stability

GLD suits investors who want straightforward gold price appreciation without company-specific complications. There’s no dividend income, but there’s also no operational risk. Your return depends solely on physical gold’s price movement.

GDX appeals to growth-oriented investors comfortable with volatility. Mining stocks typically deliver superior returns during gold bull markets but also experience steeper drawdowns during corrections. The Canadian-heavy composition of GDX may particularly interest Canadian investors seeking sector-specific mining exposure.

Final Considerations

For conservative investors prioritizing wealth preservation and inflation hedging, particularly those in Canada seeking a stable vehicle, GLD offers a simpler, more direct approach. For those willing to accept higher volatility in exchange for greater upside potential and seeking exposure to the Canadian mining sector specifically, GDX presents a compelling alternative.

Your choice between these two should align with your risk tolerance, time horizon, and investment objectives. Both play legitimate roles in a diversified portfolio’s precious metals allocation.