Investors seeking exposure to gold through exchange-traded funds face a strategic choice between the Sprott Gold Miners ETF and the iShares Gold Trust, two funds with sharply different approaches to capturing gold’s recent rally. Both gold ETFs have delivered strong returns over the past year as of February 2026, but their underlying strategies, risk profiles, and cost structures vary significantly. Understanding these differences is crucial for investors looking to add gold exposure to their portfolios during a period of record-breaking precious metal prices.
The Sprott Gold Miners ETF has posted a one-year return of 137.07 percent as of February 7, 2026, according to recent performance data, nearly doubling the 72.60 percent return delivered by the iShares Gold Trust over the same period. Despite its higher expense ratio of 0.50 percent compared to IAU’s 0.25 percent, SGDM has attracted $718.12 million in assets under management through its concentrated approach to gold mining equities.
Different Approaches to Gold Investment
The iShares Gold Trust provides direct exposure to physical gold bullion by tracking the spot price of gold. With $78 billion in assets under management and a 21-year operating history, IAU serves as a highly liquid, low-cost vehicle for investors seeking pure gold price exposure. The fund’s beta of 0.14 indicates minimal volatility relative to the broader S&P 500 index.
In contrast, the Sprott Gold Miners ETF holds a concentrated portfolio of 43 gold mining companies, with top positions including Agnico Eagle Mines Ltd., Newmont Corp., and Wheaton Precious Metals Corp. The fund weights companies based on higher revenue growth and lower debt-to-equity ratios, resulting in a beta of 0.53 that reflects greater volatility than its physical gold counterpart.
Risk and Performance Considerations
The divergent risk profiles between these gold ETFs become apparent when examining drawdown data. SGDM experienced a maximum drawdown of negative 45.05 percent over the past five years, highlighting the additional volatility inherent in gold mining equities. However, over a five-year horizon, a $1,000 investment in SGDM would have grown to $2,735 compared to $2,690 for IAU, demonstrating nearly identical long-term performance despite different paths.
Additionally, investors should recognize that precious metals can experience heightened volatility during periods of economic and geopolitical turbulence. Gold prices have benefited from international entities increasingly purchasing the metal for their reserves while the U.S. dollar has weakened, according to market observers. Nevertheless, sudden price drops remain a possibility that investors must consider.
Cost Structure and Trading Characteristics
The expense ratio difference between these funds represents a significant consideration for long-term investors. IAU’s 0.25 percent annual fee is half that of SGDM’s 0.50 percent charge, which can compound over extended holding periods. However, the higher fee associated with the Sprott Gold Miners ETF reflects the active weighting strategy and operational complexity of managing a portfolio of mining equities.
Meanwhile, the substantial difference in assets under management affects liquidity profiles. IAU’s $78 billion in assets dwarfs SGDM’s holdings, potentially offering tighter bid-ask spreads and greater ease of execution for larger institutional trades. For retail investors, both funds provide sufficient liquidity for typical investment needs.
Portfolio Diversification Benefits
Investors uncomfortable with an ETF that exclusively holds physical gold may find the Sprott Gold Miners ETF more suitable for diversification purposes. The fund provides indirect gold exposure through equity positions in companies engaged in gold extraction and production. This approach offers potential operational leverage to gold prices, as mining company profits can expand more rapidly than bullion prices during favorable market conditions.
Both investment vehicles remain tied to gold’s performance, but mining equities introduce company-specific risks including management decisions, operational challenges, and production costs. These factors contributed to SGDM’s superior one-year performance but also explain its larger historical drawdowns during unfavorable periods for the mining sector.
Investors evaluating these gold ETFs should monitor ongoing developments in precious metals markets and central bank reserve policies, as these factors will likely influence the relative performance of both funds in coming quarters. The choice between direct bullion exposure and mining equity exposure will depend on individual risk tolerance and portfolio objectives.
