GLD holds physical gold bullion stored in vaults in London, and each share represents a fractional ownership of that gold. Its price follows the gold price less fund expenses, and it avoids the operating risks of gold mining companies and the roll costs of futures. Gold pays no interest or dividends, so the expense ratio reduces returns directly over time. Gold has often done well when real interest rates fall, when the US dollar weakens, and during financial stress or geopolitical uncertainty, but it can fall sharply when real yields rise. Over long periods gold has been volatile and has not compounded income, so it is typically viewed as a diversifier rather than a source of earnings growth.
