Gold Mutual Funds: A Complete Guide

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TL;DR: Gold mutual funds fall into two structural camps, actively managed funds that buy gold-mining and precious-metals stocks, and a small set of physically backed trusts that hold bullion directly. The mining-focused funds carry expense ratios that run from roughly 0.64 percent to 1.42 percent a year, well above the 0.09 percent to 0.40 percent charged by the cheapest bullion ETFs, and some layer a front-end sales load on top of that. Tax treatment splits along the same line, gains from the mining-stock funds are taxed as ordinary securities at up to 20 percent, while most physically backed vehicles fall under the 28 percent collectibles rate. For the broader question of whether a gold mutual fund exists at all and how it compares with an ETF or physical bullion, see this site’s gold mutual fund overview.

Two Structures Share the “Gold Mutual Fund” Label

Most funds marketed as a gold mutual fund are actively managed portfolios of mining and precious-metals stocks rather than vehicles that hold bullion directly, and only a small handful of physically backed structures exist as a genuine alternative to owning the metal itself.

investingingold.com covers every route into gold as an asset class, and the gold mutual fund overview elsewhere on this site answers the intro-level question and lays out the three-way distinction between a mutual fund, an ETF, and physical bullion. This guide goes deeper, into what the largest actively managed funds actually hold, what each one charges, and how the physically backed alternatives differ from both.

The category splits two ways. The first and by far the larger group is actively managed mining-equity funds, registered investment companies that buy stock in gold-mining and precious-metals companies rather than gold itself, and that are taxed as ordinary securities rather than collectibles. The second is a small set of physically backed structures, funds and closed-end trusts that hold allocated bullion directly, of which Sprott Physical Gold Trust (PHYS) is the most established example available to U.S. investors. It is worth naming that distinction up front, because a reader who buys a gold mutual fund expecting bullion exposure and gets mining-company equity risk instead has bought a different product than the one the name implies.

The Largest Actively Managed Gold Mutual Funds

The most commonly cited actively managed gold mutual funds charge expense ratios that span more than double, from 0.64 percent at the cheapest confirmed figure to 1.42 percent at the most expensive, and two of the group also charge a sales load on top of that annual fee.

The table below lists each fund’s ticker, issuer, confirmed expense ratio, and the notes that matter most when comparing them.

Fund	Ticker	Issuer	Expense Ratio	Notes
Fidelity Select Gold Portfolio	FSAGX	Fidelity	0.64%	Invests at least 80% of assets in gold-related securities and may hold gold bullion through a wholly owned subsidiary. $2,500 minimum initial investment. Inception December 1985.
Franklin Gold and Precious Metals Fund (Class A)	FKRCX	Franklin Templeton	0.87%	Invests at least 80% of net assets in gold and precious-metals operating companies, predominantly outside the U.S. Also sold as Class C (FRGOX), Class R6 (FGPMX), and Class Advisor (FGADX).
VanEck International Investors Gold Fund (Class A)	INIVX	VanEck	1.42%	Strategy dates to 1956. Concentrates at least 25% of net assets in the gold-mining industry. Contractually capped at 1.45% for Class A and 1.00% for the institutional Class I (INIIX).
First Eagle Gold Fund (Class A)	SGGDX	First Eagle	1.14%	Carries a 5.00% front-end sales load and a 2.00% redemption fee on top of the expense ratio. Inception August 1993.
Sprott Gold Equity Fund	SGDLX	Sprott	~0.47% (unconfirmed)	Reported by Google Finance only, not yet confirmed against Sprott’s own prospectus.

Two additional names come up regularly in gold-fund roundups, the Invesco Gold and Special Minerals Fund and the Victory (formerly USAA) Precious Metals and Minerals Fund. Their current expense ratios and objectives were not independently confirmed against issuer prospectuses for this guide, so they are left out here rather than assigned a fee figure that cannot be traced to a primary source.

Physically Backed Alternatives to a Traditional Mutual Fund

The closest fund-style vehicle to owning bullion outright is a closed-end trust rather than a traditional open-end mutual fund, one that holds fully allocated London Good Delivery bars in custody at the Royal Canadian Mint and lets unitholders redeem for physical gold in minimum amounts of one full bar.

Sprott Physical Gold Trust (PHYS) was established as a closed-end trust under the laws of Ontario, Canada, distinct from the U.S. grantor-trust ETFs like GLD and IAU. Its management expense ratio was reported at 0.39 percent, above the cheapest bullion ETFs but below every actively managed mining fund catalogued above. Unitholders can redeem units for physical bullion monthly, though redemption requests must be for at least the value of one London Good Delivery bar and the redeeming unitholder bears the delivery and handling costs.

The trust’s tax treatment is its most distinctive feature. For non-corporate U.S. investors who hold units for more than a year and make a timely Qualified Electing Fund election on IRS Form 8621, gains can potentially be taxed at the standard 15 or 20 percent long-term capital-gains rate rather than the 28 percent collectibles rate that applies to most physically backed gold ETFs and to bullion itself, because the trust structure is classified as a passive foreign investment company. Missing that election forfeits the preferential treatment entirely. For the broader mechanics of how gold investments are taxed, see this site’s gold and tax regulations guide.

How to Evaluate a Gold Mutual Fund Before Buying

Screening a gold mutual fund starts with three questions in order, what the fund actually holds, what it charges every year including any sales load, and how that combined cost compares with the low-cost bullion ETFs that offer direct price exposure for a fraction of the fee.

What a fund holds matters first. Fidelity Select Gold Portfolio and Franklin Gold and Precious Metals Fund both hold mostly mining and precious-metals company stock rather than the metal itself, so a reader who wants price exposure to gold takes on equity-market risk, operating leverage, and company-specific risk layered on top of the metal’s own price movement. What a fund charges matters second. The expense ratios catalogued above, 0.64 percent to 1.42 percent, sit well above the 0.09 percent to 0.40 percent range charged by the cheapest bullion ETFs, such as iShares Gold Trust at 0.25 percent, a gap that compounds every year the fund is held. A front-end load compounds that further. First Eagle Gold Fund’s 5.00 percent sales charge on its Class A shares means an investor starts roughly 5 percent behind before the fund has produced a single dollar of return, on top of its 1.14 percent annual expense ratio and 2.00 percent redemption fee. Share class also matters. Several of these funds sell lower-cost institutional share classes, such as VanEck’s Class I (INIIX) at a 1.00 percent contractual cap, alongside the retail Class A shares listed above.

The Expense and Tax Drag Add Up Differently Than an ETF

A gold mutual fund’s total cost is never just its published expense ratio, because the tax treatment on the eventual gain and any sales load paid at purchase both compound with the annual fee to shape the after-tax return an investor actually keeps.

Actively managed mining funds are registered investment companies, which means gains on fund shares are taxed as ordinary securities, at a maximum long-term capital-gains rate of 20 percent, the same treatment as a typical stock mutual fund. That is a real advantage over the physically backed gold ETFs and bullion itself, which State Street’s own tax guidance for its SPDR Gold Shares trust confirms are taxed as collectibles, at up to 28 percent on long-term gains. The tax advantage does not offset the expense-ratio gap on its own, though. An investor paying 1.42 percent a year in VanEck International Investors Gold Fund versus 0.25 percent in a mainstream bullion ETF is giving up more than a full percentage point annually in fees, a drag that has to be recovered through active-management outperformance before the lower tax rate on the ETF side even enters the comparison. Sales loads compound the effect further for funds like First Eagle Gold Fund, where the 5.00 percent front-end charge is paid once but reduces the capital base compounding for every year that follows.

Frequently Asked Questions

Is there a mutual fund that invests directly in gold?

Most funds carrying the “gold mutual fund” label hold mining and precious-metals stocks, not bullion. The closest fund-style vehicle that holds physical gold directly is Sprott Physical Gold Trust, a closed-end trust rather than a traditional open-end mutual fund. For the fuller answer to this question and how a mutual fund compares against an ETF and physical bullion, see the gold mutual fund overview.

What is the cheapest gold mutual fund?

Among the actively managed funds with a confirmed prospectus expense ratio, Fidelity Select Gold Portfolio (FSAGX) is the cheapest at 0.64 percent. A lower figure near 0.47 percent has been reported for Sprott Gold Equity Fund (SGDLX), but that number comes from Google Finance rather than Sprott’s own prospectus and has not been independently confirmed.

Do gold mutual funds pay dividends?

Franklin Gold and Precious Metals Fund states a secondary goal of current income alongside capital appreciation, which can include distributions from the mining companies it holds. Fidelity Select Gold Portfolio’s stated objective is capital appreciation alone. Check each fund’s own prospectus for its current distribution policy before assuming any specific yield.

How are gold mutual fund gains taxed compared with a gold ETF?

Gains on actively managed mining-stock mutual funds are taxed as ordinary securities, at a maximum long-term rate of 20 percent. Gains on most physically backed gold ETFs, and on physical bullion itself, are taxed as collectibles, at a maximum rate of 28 percent. Sprott Physical Gold Trust can potentially qualify for the lower 15 or 20 percent rate through a timely QEF election. This is general information, not tax advice. Consult a tax professional about your own situation.

This article is for educational purposes only and is not investment, tax, or legal advice. Expense ratios, sales loads, redemption fees, and fund objectives change and should be verified against each fund’s current prospectus before investing. Always weigh any fund decision against your own plan, and consult your own financial and tax professionals before acting on it.